Emini and Forex Trading Update:
Friday May 17, 2019
I will update again at the end of the day.
Pre-Open market analysis
For the past few days, I have been saying that the Emini would test last Friday’s high. It achieved that goal yesterday. Can it continue up to a new all-time without forming a 2nd leg down? Of course, it can. But a 2nd leg down from a lower high is more likely.
I also said that the rally would last a few days, maybe a week, and then form a lower high. That is still likely. The odds are that the 3 week correction down will last longer. The initial selloff was in a tight bear channel. It is therefore strong enough to have a 2nd leg down. It might continue down to close the gap above the February 8 high of 2686.25.
Before yesterday’s open, I said that the Emini would probably rally yesterday. Will it continue up today? Not necessarily because it already achieved its goal of testing last Friday’s high. Now, it is in the middle of a developing trading range on the daily chart. While it will probably go at least a little higher at some point over the next few days, it probably will not go a lot higher.
Today affects the weekly chart
Today is Friday and the bulls want the week to close on its high. It would therefore be a stronger buy signal bar on the weekly chart for a pullback to the weekly EMA. The bears always want the opposite. They want a conspicuous tail on the top of this week’s candle stick. That would require the week to close 20 or more points below the high of the week.
Overnight Emini Globex trading
The Emini is down 20 points in the Globex session. It might therefore gap below yesterday’s low. If the gap is small, it will probably close in the 1st hour.
Six of the past 7 days have bull bodies on the daily chart, including the past 3 days. This is a sign of buying pressure and it increases the chance that today will also close above the open. Therefore, traders will look for a rally at some point, even if there is an early swing down.
However, there have been swings up and down on most days. That is likely again today. This is consistent with the Emini probably being in a trading range for the past month. In addition, it is likely to continue in a trading range for at least a few more weeks. Day traders will expect most days to have at least one swing up and one swing down.
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 have access to a much more detailed explanation of the swing trades for each day.
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.
EURUSD Forex market trading strategies
The EURUSD daily Forex chart has a double top and is now attempting to form a double bottom. It is therefore in Breakout Mode.
Since it is in a yearlong bear channel, the odds continue to favor lower highs and lows. But, the rally from the April low lasted only 4 days. Because that is less than prior rallies, there is a slightly higher chance of a test of the April high before a new low. However, the odds are very close to 50-50. The chart could not be in a Breakout Mode pattern unless the bulls and bears were closely balanced.
When a chart is in Breakout Mode, there is a 50% chance that the 1st breakout up or down will reverse within a couple days. Once there is a successful breakout up or down, traders will look for a measured move based on the 100 pip height of the trading range.
Today is so far small. There is no evidence that the breakout will come today. The bulls are trying to create a credible buy signal bar to complete the double bottom.
Since the bears had an outside down day yesterday, they would like a bear body today. That would increase the chance of at least slightly lower prices on Monday.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart has been in a 30 pip range overnight. The open of the day is important today. This is because a close above the open will turn today into a bull buy signal bar for Monday. That would increase the chance of higher prices next week.
The bears want a bear body. They therefore will sell rallies and try to get the day to close below the open. That bear body would turn today into a good follow-through bar on the daily chart after yesterday’s outside down day. It would therefore increase the chance of lower prices next week.
With today’s range and the bars on the 5 minute chart being small, today will probably remain a small trading range day. Day traders will continue to scalp for 10 pips, unless there is a strong breakout up or down. The bulls will buy reversals up from below the open and the bears will sell reversals down from above the open.
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 have access to a much more detailed explanation of the swing trades for each day.
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.
End of day summary
After a strong reversal up from below yesterday’s low, the Emini reversed down from a parabolic wedge top. The selloff held above the open and the day had a bull body on the daily chart.
It formed a bull candlestick on the weekly chart as well. However, because of the big tail on top, this week is a weak buy signal bar for next week.
This 4 day rally will probably fail. The odds favor a 2nd leg down. The selling might fill the gap above the February high. Whether or not it does, the Emini will probably make a new all-time high in the coming months.
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 Intraday Market Update page.
Al,
bull entry bar 11 triggered DB HL MTR.
How much space would you give a trade before getting out on be in case of bad follow through?
Its great you mark AI entry, but
if you`ve teached more how to manage trade and when to get out be/before SL hit etc.
I am sure many traders would get bigger picture.
You often say, I use wide SL, but would not let it hit.
SL is obvious, PT as well, but marking getting out point, when entry bar is weak
or go against a trade would be great help.
thx
Management requires lots of text because there are many things to consider. I cannot fit all of it on the chart.
The unfortunate reality for the bulls buying above 11 is that their initial stop goes below 10, which is far below. If there was a reversal, they would get out early. For example, if the next bar or the bar after that was a bear bar closing on its low, many would get out below that bar. If there was a small bear bar, some would wait for a big bear bar or 3 small bear bars.
If they get out and the next bar was a bull bar closing on its high, they would consider buying again.