Emini and Forex Trading Update:
Monday November 23, 2020
I will update again at the end of the day.
Pre-Open market analysis
Friday was a bear inside day that closed near the low of the day. It is both a buy and sell signal bar for today. With the bear body, it is a stronger sell setup than buy setup. The bears want a reversal down from the November 9/November 16 double top and a failed breakout above the September high.
Last week was the 2nd consecutive bear bar on the weekly chart. It, too, was an inside bar, and it is therefore also both a buy and a sell signal bar for this week. Again, because it had a bear body, it is a weaker buy signal bar.
The Emini has been in a trading range for 2 weeks. Traders expect reversals both on the daily chart and on the 5-minute chart. Also, most of the days over the past 3 weeks had reversals and closed near the open or middle of the day’s range. Traders will expect that again today unless there is a series of strong trend bars in either direction.
Overnight Emini Globex trading
The Emini is up 14 points in the Globex session. It will therefore open around the top of Friday’s late sell climax, reversing that selloff. The bulls want a breakout above Thursday’s high, which is the neckline of a 2-day micro double bottom. They then hope for a trend day that begins a move back up to the top of the 3-week trading range.
The bears are beginning with a disadvantage. Friday was a bear day on the daily chart and a sell signal bar on the daily chart. But instead of today opening near Friday’s low, the Emini is going to open near Friday’s high. That significantly reduces the chance that today will be a big bear day.
But it does not necessarily mean that today will be a big bull day. As I said, most of the days over the past 3 weeks have had swings up and down. That is what traders will expect today. However, if there is a series of strong trend bars in either direction, day traders will look for a trend day instead of a trading range day.
EURUSD Forex market trading strategies
The EURUSD Forex market on the daily chart is breaking above its 2-week triangle, but it is still below the September 10 lower high and the top of the 4-month trading range. Until there are consecutive closes above or below the range, traders will continue to look for reversals.
Today’s high is also above last week’s high. Today is therefore triggering a High 1 bull flag buy signal in the weekly chart (I showed the chart over the weekend). But today’s breakout so far is small. Also, the EURUSD twice tried to break above the September 10 high last week, but both days reversed down.
What does a successful breakout look like?
Will the bulls succeed this time? There are 2 common ways that a bull breakout succeeds. First, there can be a big bull bar closing far above the resistance. There is still time for this today, but there is no sign that it is about to happen.
Next, there can be a series of small bull days, with 2 or more of the closes above the breakout point. Therefore, even though today’s range is not big, the breakout could still be this gradual type over the next few days.
The key for the bulls is to have today close above the open, and preferably near the high. Then, the bulls will try to get either a series of bull days that gradually close above the September 10/November 9 double top, or a big bull bar closing far above that resistance.
About half of triangle breakouts fail. Therefore, the bears will try to get a reversal down this week. They want either a day that rallies and then reverses down and closes on its low, or a very big bear bar closing far below the bull trend line at the bottom of the triangle.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market rallied briefly overnight to slightly above Friday’s high and last week’s high, but it then has been sideways for 3 hours. The bulls are trying to continue the breakout to above the November 9 high, and then have the day close above that high. At a minimum, they want today to have a bull body and close above Friday’s high. That would increase the chance of a breakout above the November 9 high tomorrow.
Will the bulls get their breakout or will the bears get a reversal today? Right now, it looks like the bulls are simply trying to keep the day near the high. They have been buying pullbacks, but they have not been buying at the high. With the chart sideways for 3 hours, the bulls have switched to scalping, while hoping for the breakout.
The pullbacks have only been 15 pips overnight. That is not enough to make day traders short. If the 5-minute chart continues sideways and forms a double top, the bears will begin to short, hoping for a reversal day. But right now, day traders are only buying for scalps and hoping for a big bull breakout or a big reversal down.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
By trading above yesterday’s high, the Emini triggered a minor buy signal today. But Friday was a big bear day, which is a bad buy signal bar. There were likely to be sellers above Friday’s high, and there were. The Emini sold off on the open for 2 hours, but held above Friday’s Low. It reversed back up for the rest of the day.
Today closed near the September high, which has been the most important magnet for 3 weeks. Furthermore, it closed near the open. The majority of the days for the past 3 weeks closed either near the open or middle of the day’s range.
Today is the 3rd consecutive sideways day in the bottom half of a 3-week trading range. The market is in Breakout Mode. The bulls see a double bottom and the bears see a double top. There is generally a 50% chance of a successful breakout in either direction. But the trading range is following a strong rally. Therefore, the odds of a bull breakout are slightly higher than for a bear breakout.
With so many reversals over the past several weeks, traders will continue to look for reversals every 1 – 3 days on the daily chart, and on most days on the 5-minute chart.
See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.
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.