Emini and Forex Trading Update:
Friday October 16, 2020
I will update again at the end of the day.
Pre-Open market analysis
Yesterday gapped down and therefore created a 3-day island top. The bears were hoping that this was the start of a reversal down from a double top with the September high, and the start of a bear trend. But yesterday rallied from the open and closed the gap below Wednesday’s low. There will probably be at least a small test up before the bears will try again.
The bulls are hoping that the Emini will now reverse up from the pullback to test the October 6 high. That is the top of a month-long trading range within the 2-month trading range. They see the 3-day selloff as an Emini breakout test for last week’s breakout. Since the 3-day selloff was fast and deep, the Emini might have to go sideways for a couple days before the bulls will be able to resume last week’s rally.
Because today is Friday, weekly support and resistance can be important, especially in the last hour. Traders will pay attention to the open of the week. The bulls want today to close above Monday’s open. This week’s candlestick would then have a bull body, which would reduce the chance of a reversal down next week.
Overnight Emini Globex trading
The Emini is up 12 points in the Globex session. Since yesterday is a reasonable buy signal bar near support on the daily chart, today will probably trade above yesterday’s high. That will trigger the buy signal.
In fact, the Emini will probably gap above yesterday’s high on the open. If the gap is small, traders will look for it to close in the 1st hour.
But they will also look for a reversal up from any early selloff. This is because there are a couple magnets above. Both are near one another. There is the 3500 Big Round Number and the Open of the week. The bulls will try to prevent this week’s candlestick on the weekly chart from having a bear body.
The open of the week is only about 10 points above the current Globex price. When a market is near a magnet, it usually will reach the magnet. It will then decide whether to reverse down or break above.
After this week’s Big Up, Big Down, there is Big Confusion. That tends to result in a lot of trading range trading. Therefore, there is an increased chance of a trading range day today with the day closing around the open of the week. This week’s candlestick would then be a doji, which is a 1-bar trading range.
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. I do not want the lines to be distracting. If they are longer, I make them dotted. But, they have to be visible, so I make the shorter ones solid. 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 sold off this week from a wedge bear flag at the September 2018 high. The selloff lacked consecutive big bear bars and therefore has not been strong.
The selloff stopped yesterday at the September 30 start of the wedge. The bulls are trying to get a double bottom reversal up from that low.
This is still trading range price action, as it has been for 3 months. The chart looks bearish for a few days and then bullish. Neither side can maintain control. The result is reversals every few days. There is always both a bull and bear pattern. Until there are consecutive closes above or below the 3-month range, traders will continue to bet on reversals.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market reversed up from yesterday’s low overnight. There is now a double bottom bull flag with the September 30 low on the daily chart.
While the overnight rally has not been especially strong, it erased most of yesterday’s selloff. So far, day traders have only been buying. But they have not been buying aggressively since the range is relatively small.
This rally will probably convert into a trading range. Once there is a 20 to 30-pip pullback, the bears will begin to sell rallies for scalps. Until then, day traders will only buy. But, since today is already about the size of an average day and the rally has not been very strong, there might not be much left to the rally.
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. I do not want the lines to be distracting. If they are longer, I make them dotted. But, they have to be visible, so I make the shorter ones solid. 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 gapped up today but then went sideways for several hours. The bears got strong trend resumption down into the close.
While today was only a bear doji on the weekly chart, it was a bear reversal bar on the daily chart. It is a sell signal bar for Monday.
The Emini might have to pull back to below the October 6 high before the bulls will try for a new high. Whether or not there is a high, the bulls will have a hard time breaking far above the September high. The bears have a 40% chance of a double top and a strong break below the September low.
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.
