Emini and Forex Trading Update:
Friday May 1, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini reversed down yesterday, but was sideways for most of the day. There is a wedge buy climax on the 60 minute chart. It is nested within a bigger wedge buy climax on the daily chart. The weekly chart is in a 6 week micro channel, which is a buy climax. Traders should expect a 2 – 3 week pullback to below 2700 to begin within 2 weeks. It might have begun this week.
However, April is a bull inside bar in a 12 year bull trend. It is a reasonable buy signal bar in a decent buy setup. The Emini might have to go above the April high to see what’s there.
That would be a break above the current wedge top on the daily chart. If the bears then get a 2nd reversal down, they would have a better chance of it leading to a couple legs down.
Today is Friday so weekly support and resistance can be important
Today is Friday and therefore weekly support and resistance can be important. Last weekend, I said that this week would probably trade above the 20 week EMA, but it might reverse down in the 2nd half of the week. I said that last week had a big tail below and that increased the chance of this week having a big tail above.
The week’s range so far has been small and so has the reversal down. If the bears can get the week to close near its low, that will increase the chance of a pullback over the next few weeks.
The bulls would like the week to close near its high. That would increase the chance of triggering the monthly buy signal. But because of the buy climaxes and the monthly chart in a 2 1/2 year trading range, the upside from here over the next few weeks is probably small.
Overnight Emini Globex trading
The Emini is down 60 points in the Globex session. But the selling was not strong and the Emini has been sideways for 6 hours.
Today will probably gap below yesterday’s low. That usually results in a trading range open. This is even more likely with a 6 hour trading range ni the Globex session.
The most important prices today on the weekly chart today are last week’s high and this week’s open. If the bears can get today to close below both, they will have an increased chance of lower prices over the next couple weeks. The bulls know that and will try to get today to close near its high.
Even if a 2 – 3 week correction is underway, it will be a pullback in a strong bull trend. Pullbacks in strong trends often lack clarity. There usually is not the conviction and relentless selling that you see in a bear trend. For example, look at February and March.
More often, the Emini just works lower. Attempts to resume up have bad follow through and form minor lower highs. The selloff frequently looks like a bull flag that just keeps adding bars and drifting lower.
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. I rarely also show limit order entries and entries on the close of bars. Buyers of 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 reversing up from a higher low major trend reversal. The April selloff was a High 2 bull flag. Traders see the 2 week rally as a resumption of the March 27 bull trend reversal.
While this is true, it is important to remember that the chart has been in a trading range for 8 months. There have been many strong 2 – 4 week moves up and down. Several were much stronger than this one. Yet, each reversed within 2 – 4 weeks. Traders expect the same this time. But what they do not know is where the reversal will begin.
When there is a reversal, it will come at a resistance level. The most obvious ones are prior lower highs.
For example, the bears would like this rally to end around where the EURUSD is now. That would be a double top with the April 15 high. But since that would be from the lower half of the 8 month range, that is less likely.
Furthermore, the March 27 rally was surprisingly strong. In addition, the bulls who bought the close of that strong day never had a chance to get out. That close and high therefore are untested.
Typically a bull trap like that eventually gets tested. This reversal up, while not very strong, is good enough for traders to believe that it will continue up to the March 27 high within a couple weeks.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market had a small overnight rally. It broke above yesterday’s high.
However, the EURUSD has been sideways in a 20 pip range for 3 hours just below the April 15 lower high. This is a lack of conviction. This protracted hesitation just below significant resistance reduces the chance of a strong breakout above the resistance or reversal down from the resistance today.
Traders know that big moves often come at resistance and therefore there is an increased chance of a trend from here. At the moment, day traders are looking for 10 pip scalps, waiting for a strong breakout up or down. It will probably not come today.
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. I rarely also show limit order entries and entries on the close of bars. Buyers of 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 trading range open and then a bear trend. It formed a lower trading range. Today was therefore a bear Trending Trading Range Day.
This week is a sell signal bar on the weekly chart. There is also a nested wedge top on the daily chart. This is probably the start of a 2 – 3 week pullback. If so, the bulls will probably buy again around 2600. Traders expect a higher low and at least a small 2nd leg sideways to up.
If this is a reversal down, it will probably be minor. Therefore, it will likely have bounces along the way.
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.
