Emini breakout below March-May head and shoulders top

Emini and Forex Trading Update:
Friday May 31, 2019

I will update again at the end of the day.

Pre-Open market analysis

The Emini sold off yesterday from above Wednesday’s high and below last week’s low. However, it reversed up late in the day from a wedge higher low. This follows Wednesday’s higher low major trend reversal. Neither rally was impressive.

The bulls are hoping that this week’s break below the neck line of the 3 month head and shoulders top will fail. But they need bull bars. Without a strong reversal up within the next week, the odds will continue to favor a closure of the gap above the February 11 high.

Today is Friday and therefore weekly support and resistance is important. This is particularly true in the final hour. The most important price is last week’s low. Last week was a weak sell signal bar on the weekly chart. The bulls want this week to close above last week’s low. However, the bears want the week to close on the low of the week. That would increase the chance of lower prices next week.

Today is also the last day of the month. It is unlikely that the Emini will close above the April low. However, the bears want the month to close near its low. That would increase the chance of lower prices in June.

Overnight Emini Globex trading

The Emini is down 29 points in the Globex market. It will therefore probably have a big gap down on the open.

When there is a big gap down, there is an increased chance of a trend day. A bear day is more likely. However, a big gap down means that the open is far below the EMA. The bears do not want to sell far below the average price unless the bearish price action is far above average. Consequently, unless there are bear bars closing near their lows on the open, the bears will wait to sell a rally to near the EMA. That is typically either a double top or a wedge bull flag. It usually needs an hour of sideways to up trading to form.

The bulls hope that the gap down represents an extreme. They will therefore look to buy either a double bottom or wedge bottom in the first 90 minutes and hope for a bull trend day.

There is only a 20% chance of either a strong trend up or down from the open. Eighty percent of the time, a big gap up or down leads to confusion and at least one reversal. There typically is a trading range for the 1st hour or so before the 1st swing begins. Furthermore, if there is early trading range trading, it represents balance. It therefore reduces the chance of an exceptionally big trend day up or down.

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 trading range for a month and a bear channel for a year. The trading range now has 3 lows at around the same level. Since May 27 formed a lower high, the trading range is now a triangle.

That does not change things. The trading range alone is a Breakout Mode setup. Until there is a breakout, traders are looking for reversals.

Today reversed up above yesterday’s high. But yesterday was only a doji bar and not a strong bull trend reversal bar. Furthermore, it followed 3 strong bear bars. This is a weak buy setup. Consequently, many bulls will wait to buy above a bull bar closing near its high. The bulls today therefore will try to get today to close near its high.

Since the bears always want the opposite, they want today to close off the high and preferably below yesterday’s high. That would increase the chance that the 2 day rally will be a bear flag instead of a bull trend reversal.

Overnight EURUSD Forex trading

The EURUSD 5 minute Forex chart rallied overnight and broke above yesterday’s high. This triggered a buy signal on the daily chart for a reversal up from the bottom of the month-long trading range.

But the overnight rally has been only 30 pips. In addition, it lacked consecutive big bull bars with closes near their highs. This is not how a strong trend typically begins.

The bulls might have to wait until Monday to create signs of strength. Their minimum goals for today are to get the day to close above yesterday’s high and at the high of the day. They therefore will buy 10 – 20 pip selloffs.

The bears want the opposite. They will sell rallies to the high of the day and try to get today to close below yesterday’s high. They would prefer the day to close on its low. However, with so little energy so far, that is unlikely. In fact, the range over the past 5 hours is only 15 pips. That makes it difficult even for scalpers to make money.

Since today is the last day of the week and month, there is an increased chance of a big move up or down. However, the price action so far makes a quiet trading range day more likely.

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

The Emini had trading range price action all day, even though it closed on the low of the day, week, and month. Today was the last day in May. May is now an outside down bar and it formed a double top on the monthly chart with the September high. May is therefore a sell signal bar for June. However, the odds are that any selloff will only last another month or so.

On the daily chart, there are still magnets below. While the Emini might bounce next week because of the small parabolic wedge bear channel, the odds continue to favor lower prices.

See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.

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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.

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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.

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