Emini and Forex Trading Update:
Friday May 24, 2019
I will update again at the end of the day.
Pre-Open market analysis
The Emini sold off in a bear channel yesterday. It broke below the 2 week triangle on the daily and 60 minute charts. If the bears get follow-through selling over the next few days, the selloff will probably close the gap above the February 11 high of 2723.00.
Traders know that, in general, 50% of triangle breakouts fail. The bulls therefore will try to create a reversal up today. It would be a double bottom with last week’s low. Yesterday’s selloff, in part, was simply a test of last week’s low. The bulls bought aggressively just above that low.
Today is Friday and therefore weekly support and resistance can be important. The most important prices are last week’s low and this week’s open. Despite yesterday’s selloff, the Emini held above last week’s low. The bears want the week to close below that low or at least below the open. If they are successful, they will have increased the chance of lower prices next week.
Overnight Emini Globex trading
The Emini is up 13 points in the Globex session. It is therefore continuing yesterday’s late rally. It might gap above yesterday’s high.
However, yesterday had a bear body. It is therefore a weak buy signal bar. This reduces the chance of a big bull trend day today.
The Emini is still in its 2 week trading range. Traders will focus on the open of the week. A close above the open will create a bull body on the weekly chart. That would increase the chance of at least slightly higher prices next week.
This week’s high is probably too far above to be a magnet today. Therefore, the bulls will focus on simply trying to get the week to close above the 2842.00 open of the week.
Since that is only about 10 points above the current Globex price, the odds of a big bull day are less. More likely, today will probably be mostly sideways. Traders will look for a test of the open of the week in the final 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 yesterday broke below the April 26 low and reversed up strongly. That was the 52 week low. All other new lows in the yearlong bear channel reversed up within a few days. Each reversal led to a 2 – 3 week rally.
Yesterday was an outside up bar that closed on its high and above Wednesday’s high. It is therefore a buy signal bar for today.
When a buy signal bar is big, the stop is far below and the risk for the bulls is big. Furthermore, yesterday’s high is at the top of a 5 day tight trading range. That lowers the probability for the bulls buying above its high.
This lower probability and reduced risk/reward usually makes many bulls wait to buy a 50% pullback. Consequently, there is a reduced chance of a big rally today. However, if there is a pullback within a few days, the bulls will probably buy it. At the moment, the odds favor a move above the May 1/May 13 double top within a couple weeks.
The bears want the reversal up to fail. If there is a pullback from the reversal up within the next few days, the bears will see the 2 – 3 day rally as a pullback from the breakout to a new 52 week low. They will look for a bear bar, which they will treat as a sell signal bar for a 2 – 3 day bear flag.
Since every bear breakout for a year has led to a 2 – 3 week rally, that is more likely than an immediate continuation down.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart broke above yesterday’s high and therefore triggered a buy signal on the daily chart. However, instead of a big rally, it has been in a 30 pip range overnight and it is stalling around yesterday’s high.
This is consistent with what I wrote above. The lower probability and increased risk is making many bulls wanting to buy around the midpoint of the 2 day rally and not at the top. Today will probably remain a small day and it will probably oscillate around yesterday’s high.
Today is important. If today closes with a bull body and above yesterday’s high, it will increase the chance that a 2 – 3 week rally has begun. There will probably be buyers below today’s low.
Alternatively, if today closes on its low, the bears will have a credible sell signal bar for Monday. But, unless today is an extremely big bear day, the odds still favor more buyers than sellers below today’s low.
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
After a big gap up to the open of the week, the Emini sold off to test yesterday’s close. It then had a swing up. Today was a trading range day. Since there is a head and shoulders top and double bottom on the daily chart, the Emini is in Breakout Mode.
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.
