Emini and Forex Trading Update:
Friday January 15, 2021
I will update again at the end of the day.
Pre-Open market analysis
Yesterday was the 1st bear day in 8 days. It was an outside down bar, and it is a sell signal bar for today for a reversal down from above the 2-month bull channel. A breakout above bull trend channel that might be failing.
It is important to note that most reversal attempts in a bull trend simply become pullbacks. The bulls will continue to buy reversals until there are consecutive big bear days. At that point, traders will begin to believe that a correction is underway.
I have been saying that traders should look for a reversal to begin in January, but after January 6. We are now in that window. That increases the chance of a strong bear trend day coming at any time. With yesterday being a sell signal bar, there is an increased chance of a strong bear trend day today.
Can today be a strong bull day instead? Of course it can, but if today is going to be a big trend day, down is more likely than up.
Today is Friday so weekly support and resistance can be important, especially in the final hour. This week so far is a small inside bar on the weekly chart. The bears would like the week to close below the open of the week. The bears would then have their 1st bear bar on the weekly chart in 5 weeks. If the week closes on the low, it would be an ioi sell signal bar on the weekly chart.
Overnight Emini Globex trading
The Emini is down 16 points in the Globex session. It will probably gap down below yesterday’s low and below the open of the week. Since the open of the week is a key price this week, even if the Emini gaps below it, traders should expect a bounce up to test it in the 1st hour.
The bulls hope that the bounce will grow into a bull trend day. The bears want a reversal down from a test of the open of the week, and for the selloff to continue all day.
Which is more likely? Well, neither. After 5 sideways days trading in a small range, there is an increased chance of today being another trading range day. That means at least one swing up and one swing down. And then, in the final hour, traders will decide if the week will close above or below the open of the week. As I said, a 5th consecutive bull bar on the weekly chart is getting unusual. That increases the chance of the week closing below the open.
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 is now near the bottom of its 6-week trading range. Today is Friday, and if the bears can get today to close near the low of the week, they would increase their chance of lower prices next week. They want consecutive closes below the January 1 low. That would make a traders begin to look for a 300-pip measured move down, based on the height of the trading range.
Most trading range breakouts fail. Therefore, the bulls will try to get a reversal up from around the January low. It could come from a higher low, or from a breakout below that quickly reverses up. But the bulls need consecutive closes above the January 6 top of the range, before traders will look for a 300-pip measured move up. Until there is a breakout, there is no breakout. Trading ranges can last a long time.
There is a wedge top on the weekly chart (I post it in my weekend updates), and the January high is near the top of a 6-year trading range on the monthly chart (I sometimes post that as well). Therefore, as relentless as the rally has been since March, there is an increased chance of a selloff over the next couple months. The bears still need to do more before traders will conclude that it is underway.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market has drifted down in a weak bear channel overnight. But it is still above yesterday’s low. The bulls want a 2nd consecutive reversal up, like yesterday. That would increase the chance of a rally next week.
The bears do not need the selloff to continue any lower today. Their focus is the weekly chart. They want the week to close near its low. If the EURUSD simply stays sideways, there would be a strong bear bar on the weekly chart. That would make traders expect lower prices next week.
The overnight selloff had many little reversals on the way down and it lacked sustained selling. Furthermore, the EURUSD has been sideways for 5 hours. Despite the selloff, day traders are willing to buy as well as sell. They have been scalping for 10 pips for several hours.
The bulls want a trend reversal up to the high of the day. But just as the bears have not had a series of consecutive big bear bars on the way down, so far the bulls have been unable to get a strong reversal up. And even if they do, they simply want the day to close around the open, which is only 20 pips above the current price.
With neither the bulls nor the bears needing a big move from here, and with the chart beginning to go sideways, day traders will continue to scalp in both directions. The chance of a swing up or down is less today.
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
The Emini collapsed on the open, but reversed up strongly from a parabolic wedge sell climax, which was a test of last year’s close. The 1st reversal up was minor. There was then a higher low major trend reversal and a rally that tested the high of the day. After going sideways for a few hours and unable to make a new high, the Emini sold off again and closed near its low.
This week formed an inside bar on the weekly chart. That is an ioi Breakout Mode pattern. If next week trades below this week’s low, there will be an increased chance of a move down to 3500.
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.
