Emini and Forex Trading Update:
Thursday September 24, 2020
I will update again at the end of the day.
Pre-Open market analysis
I wrote over the weekend that traders would sell the 1st 1 – 3-day rally. Yesterday was the 3rd day up and traders sold the Emini aggressively all day.
The Emini formed a big bear outside down bar yesterday. It fell below the August low and tested the low of the week. The cash index is again down about 10%, which is the start of correction territory. The Emini is just above the top of the 3000 – 3200 target range and it might get there this week.
The magnets around 3200 are the Big Round Number, the close of 2019, a 10% correction, the June 5 high, and the July 30 bottom of the streak of 9 consecutive bull bars on the daily chart. The June 29 low of 2978.25 was the start of a tight bull channel. On the weekly chart, the 20 week EMA is just above 3200. It is therefore another important magnet below, and it is the reason why I have been saying that this selloff could fall to below 3000 before the bulls get a swing up.
The US election is going to be a mess and a huge distraction. This will make it difficult for the bulls to get a new high until the politics get resolved. Therefore, the September high might remain the high for the rest of the year.
There are still 5 trading days remaining in September. While the Emini has formed an outside down month on the monthly chart, the bulls will try to have September close above the August low. That would be less bearish going into October.
Overnight Emini Globex trading
The Emini is down 25 points in the Globex session. It is just above the cluster of support at around 3000.
After a sell climax day like yesterday, there is only a 25% chance of a 2nd strong bear trend day. If the Emini continues down today, it will probably be in a weaker bear trend, like a trending trading range day. That is a day with an early trading range, a brief bear breakout, and then a lower trading range.
When a day ends in a strong sell climax, there is a 75% chance that the Emini will have at least a couple hours of sideways to up trading that begins by the end of the 2nd hour. There is a 50% chance of some follow-through selling on the open before the trading range begins.
Can today be a big bull day? A tight bear channel typically will not reverse up into a bull trend without first transitioning into a trading range. Therefore, if there is a strong rally on the open, it will probably be minor. The bulls will probably need to stop the selling, enter a trading range, and then form a major trend reversal pattern. This would take at least a couple hours.
Also, after a huge bear trend day like yesterday, a bull day today would probably be unable to reverse all of yesterday’s selling. The best the bulls can probably get today is either a trading range day or a weak bull 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. I rarely also show limit order entries and entries on the close of bars. I do not want the lines to be distracting. If they are longer, I make them dotted. But, they have to be visible, so I make the shorter ones solid. 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 closed below the bottom of its 8-week trading range. Today is 2 days after the breakout and it is the follow-through day. It is therefore important. A 2nd consecutive bear bar closing below the bottom of the range will make it likely that the selloff will fall for about a measured move down. That would be below the June 10 high. That was the breakout point of the strong July rally.
The bears need a bear body today, which means a close below the open. The bigger the bear body and the more it closes on its low, the stronger the follow-through selling. That will increase the chance of the selloff continuing for about a measured move down.
The bulls want the bear breakout to fail. At a minimum, they do not want today to be a bear day closing near its low. They would prefer today to close above its midpoint. If possible, they will try to get today to close on its high and have a big bull body. If they get that, traders will look for a reversal up from a failed breakout.
With the overnight range being small, today will probably not be a big day up or down. The fight today will be over whether there will be a bull or bear body. Unless the bulls get a strong reversal up, traders will expect at least slightly lower prices in October.
Outside down candlestick on the monthly chart
This month is an outside down month on the monthly chart (not shown). Since there are 4 consecutive bull bars on the monthly chart, the bulls have been strong. They will try to get September to close next Wednesday above the August low, which is the bottom of the 8-week trading range.
On the 60 minute chart, this selloff began with a spike down on September 21. It has been in a bear channel since then. A Spike and Channel bear trend usually evolves into a trading range. The bulls typically get a break above the bear trend line and then a rally up to the start of the bear channel or at least up to a major lower high in the channel.
The bear channel began with Monday’s lower high of 1.1774. With 5 trading days left in September, there is enough time for the EURUSD to get there by the end of the month.
At the moment, this is likely to happen. Why is that important? Because it is back above the bottom of the 8-week trading range, which means back above the August low.
If September closes above the August low, it would be less bearish going into August. It would increase the chance that the selloff is just a pullback from the very strong 5-month rally instead of the start of a bear trend.
Overnight EURUSD Forex trading
The EURUSD Forex market is continuing down in its 3-day bear channel. There is no sign of a reversal. Day traders are continuing to sell rallies, betting that each will form a lower high and lead to a new low.
The 3-day bear channel on the 5-minute chart has had many bear rallies of 20 – 30 pips. This is big enough for bulls to buy reversals up for 10-pip scalps. However, it is still easier for day traders to make money selling reversals down from those rallies.
The fight today is over the close. Will today close near its low, making lower prices likely tomorrow? Or, will the bulls get a bull body on the daily chart? That will increase the chance that a reversal up to the start of the 3-day bear channel has begun. Until there is a strong reversal up, traders will continue to bet on lower prices.
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. I do not want the lines to be distracting. If they are longer, I make them dotted. But, they have to be visible, so I make the shorter ones solid. 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
I talked about the important support around 3200. Support and resistance are magnets. They draw the market to them. The Emini dipped below 3200 and rallied strongly in a Spike and Channel Bull Trend today to above the resistance of the open of the week and the August low. It then evolved into a trading range, which is what typically happens when there is a Spike and Channel trend.
Today is a buy signal bar for tomorrow on the daily chart, but it has a big tail on top and the Emini is in a bear swing. This is a weak buy setup.
However, the bulls will try to get tomorrow to close above the open of the week. This week would then have a bull body. The past 3 bars on the weekly chart had bear bodies and 4 consecutive bear bars on the is unusual. Therefore, traders should expect an attempt by the bulls to get the Emini back up there tomorrow.
Also, next Wednesday is the final day in September. The close of the month will probably be above the August low. This is because September is an outside down month in a strong bull trend. The close of the bar is usually above the low of the prior bar.
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
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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.
