Emini and Forex Trading Update:
Tuesday February 4, 2020
I will update again at the end of the day.
Pre-Open market analysis
Yesterday had huge moves up and down, but it did not break above Friday’s high or below Friday’s low. It was therefore an inside day.
Furthermore, it was the 6th day in a developing trading range. It is therefore a Breakout Mode bar. If the bulls get 2 or 3 big bull days and a couple closes above 3300, traders will conclude that the bull trend has resumed.
I have been saying for several weeks that 3300 has been a magnet. The Emini might have to get there before traders decide whether the bull trend will resume or there will be a 2nd leg down and a 5% correction. Without a strong break back above 3300, the odd still favor a 5% correction.
The swings up and down have been big. Day traders will continue to look for swing trades, even though the daily chart is in a 6 day tight trading range.
Overnight Emini Globex trading
The Emini is up 42 points in the Globex session. There will therefore be a big gap up today. Traders expect another test of 3300 before they will decide if the correction has ended or if there will be a 2nd leg down and a 5% pullback.
When there is a big gap up, the Emini is far above its 20 bar EMA on the 5 minute chart. Traders are hesitant to pay far above the average price. Therefore, most days that have a big gap up enter an early trading range.
If there is a trading range for the at hour or two, the bears look for a wedge rally or double top and then a swing down. However, the bulls look to buy a double bottom or wedge bottom near the EMA.
Also, a trading range open is a sign of neutrality. It reduces the chance of a relentless trend up or down once there is a breakout.
There is a 20% chance of a very strong trend up or down from the open. Up is slightly more likely because 3300 is an important magnet and it will probably be at least 10 points above the open. Also, if there is a strong trend after a big gap up, a bull trend is slightly more likely.
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 rallied strongly on Friday after breaking below a month-long head and shoulders top. However, the bear channel was tight and the weekly chart (not shown) has 4 consecutive bear bars. This makes the rally more likely a pullback from the 4 week selloff and not the start of a swing up to the top of the 6 month trading range.
Friday’s rally was strong. Furthermore, it was the 2nd consecutive bull day. There will probably be at least a small 2nd leg up within a week. But it will probably not reach the top of the 6 month trading range.
Bulls want a test of the January low
Most bulls want to see a test of last week’s low and then a 2nd reversal up. If they get that within the next couple weeks, they will be more willing to buy. They would then have a better chance of a test of the January 16 lower high or the January 1 top of the trading range.
If the EURUSD breaks strongly below that low, the bulls will buy a reversal up from around the October low. Currently, it is more likely that yesterday’s reversal down will not lead to a resumption of the 4 week bear trend. But the bulls really want some kind of a double bottom after the 4 week selloff.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market sold off 25 pips overnight. However, it did not fall below yesterday’s low.
Traders are wondering if there will be a small 2nd leg up after Friday’s rally before a test down to the January low. Also, Friday’s rally was strong enough to make a least a small 2nd leg up likely. Consequently, the selloff from yesterday’s high will probably form a higher low and lead to another test of Friday’s high.
But that higher low will probably come from below yesterday’s low. Legs in trading ranges usually go past support or resistance before reversing.
Also, the higher low might not come today. The overnight range and the bars have been small. In addition, since at least a small 2nd leg up this week is likely, there are probably buyers not far below yesterday’s low. This makes a big bear day unlikely. Yesterday’s big selloff makes a big bull day unlikely. Traders therefore expect today to stay quiet and they will continue to look for 10 – 20 pips scalps.
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 opened with a big gap up. It then rallied in a Small Pullback Bull Trend and broke above the 3300 Big Round Number. There was a parabolic wedge within a wedge, and that led to a reversal down. It oscillated around 3300 for the remainder of the day and closed 2 ticks below it.
I have talked about 3300 many times over the past few weeks. I have said that the Emini would probably have to test it before the bears could get down to a 5% correction. It has been important support and resistance for several weeks. If instead the bulls get consecutive closes on the daily chart above 3300, the bull trend will probably continue up to a new high.
I will be away at the MoneyShow in Orlando through the weekend and will not write any updates until Monday.
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.
Hi Al,
hopefully, I am not daring too much to ask.
I understand importants of analyzing PA from bear and bull perspective.
But, I`ve heard many times from traders they struggle taking trades while listening many reasons for and against the trades.
It kind of discarage them.
I understand, you are mostly scalper and looking for high probability situations.
Sometimes it feels like you analyze all computers out there together:)
I would like to dare to suggest :), if you could try one day during your live commentary to forget 90% of what you see and focus more on taking trades, such as this is DT L2 at MA lets take it.
Almost like trying to take all those profitable trades, which are marked as reasonable stop entry in summary chart.
You never know, what you mind find.
There is always a bear and bull setup so it is pointless to limit what Al comments on. probability is 40-60% for any trade. In the future when you are a comfortable trader you will care less what anyone says. you take the trades you want when you see them based on your own system.