Emini and Forex Trading Update:
Wednesday January 27, 2021
I will update again at the end of the day.
Pre-Open market analysis
Yesterday broke above Monday’s big outside up doji bar, and made another new Emini all-time high. But yesterday was a small bar on the daily chart, and it had a bear body. It is therefore a sell signal bar for today.
While the risk of a 10% correction is growing with the bull channel on the daily chart lasting a long time, traders will keep buying every 1- to 3- day pullback until there are consecutive big bear days. Then, they will look for a 2nd leg down and a 10% correction over 2- to 3- weeks.
The bulls want January to be the 3rd consecutive bull bar closing on its high on the monthly chart. If the Emini simply goes sideways for the remainder of the week, they will have achieved their goal. Traders would then expect higher prices in February.
The bears want to undo some of the bullishness. They would like the month to close in the middle of its range, and preferably below the open. Traders would then look for sideways to down trading in February.
There is a FOMC announcement today at 11:00 pm PST. It can be a catalyst for a big move in either direction. This will be the first FOMC meeting with Biden as president. However, the Fed many months ago said it was not planning any changes in its policy for at least a couple years. That reduces the chance of any surprises, and of a big trend after the report.
With most days over the past two months having at least one swing up and one swing down, traders will expect that again today. However, day traders should exit their positions ahead of the FOMC report. There is usually a fast move up and down after the report. Traders should wait at least 10 minutes to see if a trend might be starting.
Overnight Emini Globex trading
The Emini is down 42 points in the Globex session. It will therefore break far below yesterday’s low, which will trigger the sell signal on the daily chart. It will also be far below the open of the week. Remember, the bears want a bear bar on the weekly chart.
Also, markets often change the appearance of bars just before they close. So far, January has been a big bull bar on the monthly chart. Therefore, there is an increased chance that the Emini could sell off down to the open of the month by the end of this week.
Because the buy climax on the daily chart is extreme, there is an increased chance of big bear days coming at any time. When there is a big gap down, there is an increased chance of a trend day up or down. But if there is a trend, down is more likely.
Will today have both a swing up and a swing down today, like most days in January? We’ll see. If there is a series of strong trend bars up or down on the open, today will more likely be a trend day.
Yesterday’s setups
Here are several reasonable stop entry setups from yesterday. I show each buy entry with a green rectangle and each sell entry with a red rectangle. Buyers of both the Brooks Trading Course and Encyclopedia of Chart Patterns have access to a much more detailed explanation of the swing trades for each day (see Online Course/BTC Daily Setups).
My goal with these charts is to present an Always In perspective. If a trader was trying to be Always In or nearly Always In a position all day, and he was not currently in the market, these entries would be logical times for him to enter.
If the risk is too big for your account, you should wait for trades with less risk or trade an alternative market like the Micro Emini.
EURUSD Forex market trading strategies
The EURUSD Forex market on the daily chart is breaking below a 3-week triangle. However, it is just above the bottom of a 2-month trading range. The bears need consecutive closes below the range, before traders will look for a measured move down to the November low of 1.16. While the probability currently is slightly greater for the bears, a single big bull bar could flip it back in favor of the bulls.
There is a FOMC report today at 11 am PST, which can affect all financial markets. Day traders should exit their positions ahead of the report, and wait at least 10 minutes before resuming trading.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market sold off in a tight bear channel overnight. Yesterday was a buy signal bar on the daily chart, yet today is breaking below the low of the bar, instead of above the top.
The bears hope that this is a resumption of the bear trend that began on January 6. If it is, there will many, many bear trend days over the next couple weeks.
The overnight selling has been in a tight bear channel. Day traders have only been selling.
All financial markets typically enter a trading range an hour or more before the 11 am PST FOMC announcement. If there is a trading range ahead of the report, day traders will look to buy reversals up from the bottom, in addition to continuing to sell.
Can today reverse up into a bull trend? When a selloff has been relentless like this, the bulls only have a 30% chance. There is a 70% chance that today will be sideways to down all day. However, since the FOMC can be a catalyst for a big move up or down, traders will look for a possible reversal up after the report, even though it is unlikely.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Here are several reasonable stop entry setups for today. I show each buy entry with a green rectangle and each sell entry with a red rectangle. Buyers of both the Brooks Trading Course and Encyclopedia of Chart Patterns have access to a much more detailed explanation of the swing trades for each day (see Online Course/BTC Daily Setups).
My goal with these charts is to present an Always In perspective. If a trader was trying to be Always In or nearly Always In a position all day, and he was not currently in the market, these entries would be logical times for him to enter.
If the risk is too big for your account, you should wait for trades with less risk or trade an alternative market like the Micro Emini.
End of day summary
The Emini had a big gap down and then entered a triangle going into the FOMC announcement at 11 am PST. It then sold off to below the open of the month. It closed at the bottom of its 3-month bull channel and it broke far below the 3-week bull trend line. At the moment, it is more likely than not that a 1-% correction down to 3500 has begun. But if tomorrow is a strong bull day, then traders will wonder if there will be another new high before there is a correction.
I have been saying for several weeks that this month’s open could be important at the end of the month. The bulls want a 3rd consecutive bull bar on the monthly chart and the bears want a bear bar. The Emini might oscillate around the open of the month through the end of the month on Friday. However, unless there is a strong reversal up in the next few days, traders will expect lower prices.
See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.
Trading Room
Traders can see the end of the day bar-by-bar price action report by signing up for free at BrooksPriceAction.com. I talk about the detailed S&P Emini futures price action real-time throughout the day in the BrooksPriceAction.com trading room. We offer a 2 day free trial.
Charts use Pacific Standard Time
When I mention time, it is USA Pacific Standard Time (the Emini day session opens at 6:30 am PST, and closes at 1:15 pm PST). You can read background information on the intraday market reports on the Market Update page.
