Emini and Forex Trading Update:
Wednesday December 30, 2020
I will update again at the end of the day.
Pre-Open market analysis
Yesterday was an outside down day, and a reversal down from the top of the bull channel that began with the November 9 high. If today trades below yesterday’s low, it will trigger a sell signal. That would increase the chance of at least an Emini bears reversal down (minor) into the end of the year.
However, the daily chart has been in a Small Pullback Bull Trend since November 10. Every reversal down became a bull flag within a couple days. The bulls are hoping that any selloff will be like all of the others for more than a month.
What is different now is that the candlesticks on the monthly and yearly charts close on Thursday. There is an increased chance of a minor reversal just before a bar on any timeframe closes. Therefore, there is an increased chance of a 50- to 100-point pullback by tomorrow’s close.
Increased chance does not mean high probability. It is still more likely that 2020 will close within 50 points of the all-time high. If it closes within 20 points, the bulls will try to get Monday to gap up. There would then be a gap up on the daily, weekly, monthly, and yearly charts. That would be a sign of strength, and it would make traders more confident about buying at the high.
Overnight Emini Globex trading
The Emini is up 10 points in the Globex session. It will therefore probably open in the middle of yesterday’s range. Since yesterday had a big range, there is an increased chance that today will stay within yesterday’s range.
Yesterday was an outside bar on the daily chart. If today is an inside day, there would be an ioi (inside-outside-inside) Breakout Mode pattern on the daily chart going into the final day of the year. Traders are deciding if the year will close on the high, or if there will be a 50-point reversal down. It looks like they might wait for the final trading day of the year to decide.
Most days over the past 2 months have had a lot of trading range trading, and at least one swing up and one swing down. With today opening in the middle of yesterday’s range, yesterday having a lot of trading range trading, and this being a holiday week, there is an increased chance of more trading range price action again today.
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. 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 has been in a strong bull trend since the November 4 low. All bull trends repeatedly form wedge tops, but most tops fail and become bull flags. There have been many minor reversals over the past 2 months. Each lasted only 1 to 3 days. Until the bears get a strong sell signal bar and a strong reversal down, the bulls will continue to buy 1 to 3-day reversals.
The bears tried to get a reversal down 3 days ago, but they were unable to get a bear body. The past 3 days have had decent bull bodies. Traders are continuing to bet on higher prices.
The bulls want a break above last week’s high, a test of the top of the bull channel at around 1.24, and a test of the measured move target at 1.2409. The rally ultimately will reach the February 2018 high, but there will likely be at least one pullback lasting several weeks before the EURUSD gets there. There is an increased chance of reversals in Forex markets in early January.
This rally might be too strong. It has lasted about 50 bars. That usually attracts profit takers. Once the bulls take profits, there will probably be a couple legs down over a few weeks. The 1st target is the start of the bull channel, which is the December 9 low.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market rallied strongly in the overnight session to last week’s high, sold off strongly from that high, and then had a weaker rally back up to last week’s high.
While the day is near the high of the session, it is a trading range day. Day traders have been selling and buying for 10- to 20-pip scalps.
Because of the strong reversal up from the strong overnight selloff, day traders are more interested in buying. That reversal up significantly reduces the chance of a bear trend day. However, the sharp overnight selloff reduces the chances of a strong rally from here. If the EURUSD is not going to a new low, and it is not going far above the overnight high, day traders will look for reversals.
The bulls want today to close above last week’s high. That would increase the chance of the year closing at the high.
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. 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
Today gapped up but sold off from a Low 2 top. While the day was mostly sideways, it continued to form lower highs and lows. It was therefore also a bear channel. There was a late bear breakout down to the open of the week and the 60 minute EMA, and then a lower trading range.
Today was an inside day on the daily chart. Since yesterday was an outside day, there is now an ioi Breakout Mode pattern. Traders are deciding if the year will close within 20 points of the high or 50 points below the high. If tomorrow gaps down, there would be a 3-day island top. If tomorrow is a big bear trend day, whether or not there is an island top, it would increase the chance that the Emini has begun a reversal down to 3500.
Tomorrow is also the last day of the week. The open of the week could be a magnet at the end of the day.
It is also the last day of the month, but the only monthly magnet is the open of the month. It might be too far below to get there tomorrow.
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.
