Emini and Forex Trading Update:
Wednesday May 29,2019
I will update again at the end of the day.
Pre-Open market analysis
Yesterday began a break below the neck line of a 3 month head and shoulders top. If today is a big bear trend day, the odds will favor a closure of the gap above the February 11 high of 2726.50. Furthermore, traders will look for a measured move down and a retracement of half of the 2019 rally.
The 2800 area has been support for 2 months. A strong break below will turn it into resistance.
However, if the bulls get a rally today, traders instead will suspect that yesterday was just a test of the neck line of the head and shoulders top. They will look for a reversal up this week to buy.
At the moment, the odds continue to favor a closure of the gap above the February 11 high. But, a strong reversal up this week could return the Emini to neutral.
Overnight Emini Globex trading
The Emini is down 18 points in the Globex session. It therefore will probably gap below yesterday’s low.
When there is a big gap down, the Emini typically enters a trading range for the 1st hour or so. The bears look to sell a wedge rally or double top around the EMA for a swing down. However, the bulls want a wedge bottom or double bottom and then a swing up. If there is a trading range open, it reduces the chance of a big trend day up or down.
Since yesterday was a sell climax, there is only a 25% chance of a strong bear day today. In addition, there is a 50% chance of some follow-through selling in the 1st 2 hours. Finally, there is a 75% chance of at least a couple hours of sideways to up trading that begins by the end of the 2nd hour.
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 been in a bear channel for a year. Every rally has failed after 2 – 3 weeks and it led to a 2 – 3 week selloff and another new low. However, the bulls bought every new low and created another bear rally. There is no sign that this pattern is about to change.
What is unclear at the moment is whether the most recent bear rally ended with the May 13 high and last week’s rally is a pullback in a resumption of the bear trend. If so, the bears will get a break to a new low over the next week.
The alternative is that the May 23 new low is the start of another 2 – 3 week rally. If that is the case, the 3 day selloff is a pullback from last week’s reversal up. The bulls will then look for another couple week’s of higher prices. That would probably lead to a break above the May 13 high, but not the March 20 major lower high.
Trading range means Breakout Mode
When a market is in a trading range, it is telling traders that the bull and bear cases are about equally likely. The probabilities shift slightly in favor or one side or the other every few days. At the moment, there is a slightly higher probability that the 3 day selloff will form a higher low instead of a new low. The bulls need a bull bar today or tomorrow to show that they are resuming control.
However, the bears need to continue to form more bear bars. Additionally, they need a break below the May low to show that another swing down is underway.
The chart is still in a trading range. Day traders expect legs up and down to reverse every few days. In addition, the expect most days to be small.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart has been in a 30 pip range overnight. In addition, it has been in a 15 pip range for the past 5 hours. At the moment, day traders are waiting for the range to expand before resuming trading.
Three days down is about as long as a pullback should last. Therefore, if last week’s low is the start of a swing up, the bulls need a bull day today or tomorrow. They will buy selloffs and try to get today to close above the open. That would create a credible buy signal bar on the daily chart.
The bears do not need a big bear bar. All they need is the absence of a good buy signal bar. They know that as long as they are able to continue to create bear bars on the daily chart, the odds will begin to shift in favor of another new 52 week low. They will sell rallies to above today’s open and try to get the day to close below 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
Today gapped down and broke below the neck line of the March-May head and shoulders top. But, it was a trading range day. Since it had a bear body on the daily chart, it is a weak buy signal bar for tomorrow.
The bears want a measured move down. That would close the gap above the February 11 high. In addition, it would be about a 50% correction of the 2019 rally.
However, the bulls hope that the breakout will fail. They need to get a strong reversal up over the next few days. Without that, the Emini will probably trade down to the targets below.
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.
