Emini bear trap and bull trend reversal above ledge

Emini and Forex Trading Update:
Monday October 7, 2019

I will update again at the end of the day.

Pre-Open market analysis

The Emini sold off strongly below the top of the August ledge last week. It then reversed up strongly, as it often does after an October selloff. The bull trend reversal had 2 big bull bars closing near their highs. That means the selloff was a bear trap. A bear trap typically has at least a small 2nd leg sideways to up. Consequently, the bulls will look to buy the 1st – 3 day pullback.

Furthermore, a reversal up from a sell climax usually tests the top of the sell climax. Therefore, last Tuesday’s high of 2994.00 is a magnet above.

Overnight Emini Globex trading

The Emini is down 8 points in the Globex session. Since Friday was a buy climax, there is only a 25% chance of another strong bull day today. Day traders should expect at least a couple hours of sideways to down trading that begins by the end of the 2nd hour.

Friday’s high was just above the 2946.00 top of the August ledge on the daily and weekly charts. Since that is such an important price, there is an increased chance of the Emini oscillating around it for a few days. This is especially true after a climactic 2 day rally.

Friday’s setups

Here are several reasonable stop entry setups from Friday. 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.

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 weekly Forex chart has been in a bear channel for almost 2 years. There have been many reversal attempts, which always happens in trends. As expected, each was minor.

There is now a nested wedge bottom and a good buy signal bar. This will probably result in at least a few weeks of sideways to up trading. Since the channel down since June is tight, the reversal will probably be minor, like all of the others.

With the good buy signal bar last week, there will probably be enough short covering and bull scalping for a couple legs sideways to up trading. This week will probably go above last week’s high to trigger the buy signal.

The 1st targets are the 20 week EMA, the top of the smallest wedge bear channel, and the August 6 high of 1.1250, which is the start of the smallest wedge. All 3 are around the same price.

Can the weekly chart continue down to the measured move targets and the April 2017 gap without going above last week’s high? Probably not. The bears have not been strong enough to stop minor reversals up. Traders expect at least a 2 – 3 week bounce here or soon.

Overnight EURUSD Forex trading

There have been 4 consecutive bull days on the daily chart (not shown). So far, today is the 5th.

On the 5 minute chart, there was an early selloff overnight and then a bull trend reversal. But the rally has only been 35 pips. While the bars in the reversal up look good, they are relatively small.

There is enough momentum up for day traders to expect higher prices. At a minimum, they are trying to get above last week’s high of 1.0999. That is only 4 pips above today’s current high. The bulls will probably trigger the weekly buy signal today or tomorrow.

But will they get a strong surge above last week’s high and then a quick move up to the 1.1250 resistance? Since this reversal will probably be minor, like all of the others over the past 2 years, the bulls should expect to be disappointed. Many will take quick profits and the bears will scale in as the rally continues. Consequently, any rally over the next few weeks will probably look like a bear leg in s 2 year bear channel than the start of a bull trend on the daily chart.

Since higher prices are likely over the next 2 – 3 weeks, bulls will be more willing to buy selloffs. Also, the bear day traders will prefer to sell reversals down and take 10 – 20 pip profits.

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.

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

While the Emini rallied on the open, the rally had many tails and bear bars. It was likely a bear leg in a trading range day. The Emini reversed down from above Friday’s high and tested the August ledge top and the open of the day.

Today is a sell signal bar for tomorrow. But after last week’s reversal up, there will probably be buyers below. The Emini might oscillate around the August ledge top for another day or two.

See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.

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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 Intraday Market Update page.

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