Emini and Forex Trading Update:
Wednesday April 22, 2020
I will update again at the end of the day.
Pre-Open market analysis
Yesterday sold off and tested 2716. That is 20% down from the high. If the Emini falls below that price, it will be back in a bear market. That should happen within a week or so.
However, the wedge top on the daily chart and 60 minute chart should get at least 2 legs down. It is possible that yesterday ended a brief 1st leg down. If so, the Emini could bounce to around 2800 before beginning the 2nd leg down.
That 2nd leg down will probably retrace about half of the rally. It might even reach April 1 higher low. A reasonable target is between 2500 and 2600 within a few weeks.
Traders should expect Emini to remain in a trading range for the rest of the year. Last week might be the top of the current leg up. If it is not, the top will likely not be much higher. The odds favor a test down to around 2500 within a few weeks. Traders will look to sell rallies, but they will then buy a higher low around 2500.
Overnight Emini Globex trading
The Emini is up 34 points in the Globex market. I have been saying that there will probably be at least a couple legs down to below 2600 on the daily chart over the next few weeks.
Traders are wondering if the selloff has begun. Because there is a wedge top at resistance on the daily chart and consecutive bear days, there is better than a 50% chance that it has.
However, the daily chart will probably be in a trading range all year. When that is the case, legs up and down have bad follow-through, which means traders expect reversals every few days. Also, there will be more trading range days on the 5 minute chart.
Yesterday began to reverse up from a major trend reversal on the 5 minute chart. That reversal continued overnight, even though it is still small. It might continue again today, but there will probably be sellers around 2800, if the Emini gets there this week.
Because the daily chart is probably in a bear leg, traders expect lower highs and lows. Consequently, even if the Emini bounces for a day or two, the swing down will probably continue for a couple weeks.
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 has been in a trading range for 8 months and it continues to be in breakout Mode. It broke below a triangle on the daily chart last week.
However, it has entered a 5 day tight trading range. Traders are deciding if the breakout below the triangle will succeed or fail.
This 5 day range is a smaller Breakout Mode pattern. Every Breakout Mode pattern has both a reasonable buy and sell setup. The past 4 days have both a micro double top and a micro double bottom.
The bears want tomorrow to break below today’s low. That would be a resumption of the breakout below the triangle. They then want the selloff to continue to below the March low.
The bulls want the breakout above yesterday’s high to accelerate back into and then above the triangle. Traders would then conclude that the bear breakout failed and the bull breakout was beginning. They then want a strong rally to above the March 27 high and then the March 3 high.
The bars and bodies have been small for 4 days. There is no energy. But the apex of a triangle is often an area where the market begins to trend. But traders want to see a series of big, strong trend bars. Until they do, they will continue to bet on quiet trading.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market triggered a micro double bottom buy signal overnight by going above yesterday’s high. However, the breakout was small. Also, the day’s range is small. Day traders are scalping for 10 pips, looking for reversals.
Everyone knows that the market is in Breakout Mode. That increases the chance of a trend beginning soon. But until traders begin to see a series of big trend bars and big bodies, they will continue to look for small moves and reversals.
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 gapped up and then sold off for the 1st hour. There was a wedge bull flag and an opening reversal up from near the EMA. It led to a bull channel and a test above 2800. It collapsed into the close to back near the open. Today was a doji bar on the daily chart.
The Emini should soon begin a 2 – 3 week pullback from the wedge top on the daily chart. However, it might make one more new high before the pullback to below 2600 begins. The bulls will buy the pullback.
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.
Al, I know you have been saying that price will likely be in a trading range for the the foreseeable future..
Question.. is there a scenario where price breaks strongly downwards, breaking out of the expanding triangle?
Thanks for your time..
Price action is similar to quantum physics in that for both, anything is possible. I have been saying that the range will be 1800 – 3600 for the next 10 years. Maybe a little bigger.
I have also said that there is currently less than a 30% chance of a 60% correction within the next few years. But I also said 60% will be the floor. The Fed has made it clear that they will print “infinite money” to prevent the destruction of the economy.
Can the market fall 61%? Sure, but not 70%. That is getting too close to the 89% of the Great Depression. I do not see the Fed allowing that.
Thank you very much Al, stay safe..