Emini and Forex Trading Update:
Thursday January 16, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini has been in a Small Pullback Bull Trend for 4 months. That is a strong bull trend and the bulls have bought every 1 – 3 day selloff. Consequently, the downside risk is small.
Yesterday again failed to break above the 3,300 Big Round Number. However, the late rally makes it likely that the bulls will try again today. Today might even gap above that resistance.
Can today be the start of a 2 – 3 week selloff? Probably not. After a strong rally, the bears typically need at least a micro double top before they can get a swing down. Therefore, the best the bears can probably get is a brief pullback over the next few days.
Overnight Emini Globex trading
The Emini is up 11 points in the Globex session. Since it is above the 3,300 Big Round Number, it might gap above it today.
The bulls want a gap up and they want the gap to stay open. If there is a gap up above major resistance, there is an increased chance of a trend day up or down. Because the bull trend is so strong on the daily chart, if there is a trend, up is more likely than down.
It is important to remember that the rally on the daily chart is extremely strong. That means it is a buy climax. A buy climax sometimes attracts profit-takers. If many bulls take profits, the Emini could sell off strongly for 2 – 3 weeks.
There is no sign of this at the moment. Traders therefore are continuing to buy, knowing that markets have inertia. They tend to continue to do what they have been doing. The Emini has been going up and traders will bet on this continuing until it clearly is not.
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 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 daily chart of the EURUSD Forex market has been rallying over the past week after a small weak wedge bull flag. Unless the rally accelerates soon, it will probably form a double top bear flag with the January 6 lower high.
If it turns down there, traders will see the rally as the right shoulder of a head and shoulders top. The left shoulder would be the December 13 high. The bears would then want a break below the December 20 low. That is the neck line. A measured move down would break below the November low.
While the bulls have been in control for 4 months, the rally is still only a leg in a 6 month trading range. They need consecutive closes above the January high before traders will conclude that a bull trend is underway on the daily chart.
Since trading ranges resist breaking out, it is more likely that this week’s rally is just a small leg near the top of the 6 month range. Traders expect it to fail around the January 6 or the January 1 high. They then expect a 2 – 3 week leg down. All legs up and down for almost 2 years have lasted only a few weeks.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market broke above yesterday’s high overnight. However, it reversed down over the past hour.
Traders have been buying below the low of the prior day and selling above the high of the prior day for 2 weeks. This is a limit order market and a sign of trading range price action. It reduces the chance of a big trend day. Day traders will continue to scalp reversals on the 5 minute chart until there is a sustained breakout up or down. With the overnight bars being small and the overnight range being small, the odds are that today will be another trading range day.
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
The Emini gapped above the 3,300 Big Round Number resistance today, but spent most of the day going sideways. However, it was forming higher highs and lows and therefore it was in a bull channel. The bulls bought more aggressively in the final hour and created a strong Buy The Close rally into the close. That increases the chance of higher prices again tomorrow.
Because the daily chart is in a buy climax, there can be a sharp reversal down at any time. A gap down tomorrow or next week would create an island top.
However, island tops and bottoms are minor patterns. The bulls will probably continuing buying every 1 – 3 day pullback, just as they have been for 4 months. They will continue to do so until there is a clear top and a strong reversal down.
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.
