Emini and Forex Trading Update:
Friday September 11, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini formed an outside down day yesterday. The bears are hoping that the bear trend is resuming.
However, the bulls would like at least one more leg up after the 3 day sell climax. They want this selloff to be brief and for the bull trend to resume.
But there were 9 and 7 day streaks of consecutive bull days last month. Bull streaks usually result in a selloff to below the bottom. Consequently, traders should expect this selloff to fall below 3200 before there is a new high.
Today is Friday and what happens today affects the appearance of this week’s candlestick on the weekly chart. The bears want this week to close below the open of the week so that it will have a bear body. Moreover, they want it to close below last week’s low. That would increase the chance of lower prices next week.
The bulls are hoping that the Emini closes above the open of the week. They would then have a better chance of a 2nd leg sideways to up next week. However, unless the bulls get 2 or 3 big bull days, traders expect the Emini to work down to 3000 – 3200 this month.
50 day moving average is an important magnet just below
The 50 day MA is just a little below yesterday’s low. Many traders want to wait for the Emini to touch it before looking for a 1 – 3 day bounce, or possibly for a resumption of the bull trend. Therefore, the Emini might have to go sideways to down for another day or two before it can test 3450 – 3500, if it is going to test that level.
It might already have begun a move down to 3000 – 3200. We should find out in the next few days. Traders want to see if it reverses up from the 50 day MA or breaks strongly below it. Traders might be waiting for Wednesday’s FOMC announcement.
Overnight Emini Globex trading
The Emini is up 17 points in the Globex session. Since yesterday ended with a sell climax, there will probably be at least a couple hours of sideways to up trading that begins by the 2nd hour today.
There is cluster of magnets around yesterday’s late trading range. That further increases the chance of trading range price action today.
The bulls want this week to close above last week’s low. Last week was an outside down week and therefore a sell signal bar on the weekly chart.
If this week closes above last week’s low, this week would be a weak entry bar. That would reduce the chance of a big selloff next week.
The bulls also want the week to close above the open of the week. This week would then have a bull body on the weekly chart. That would further reduce the chance of a strong selloff next week.
Finally, this week has been testing the February high, which is the breakout point for the August rally. The bulls want this week to close above that high. That would increase the chance that this week’s selloff was just a pullback to test that breakout point.
The bears always want the opposite. They want the week to close on its low, below last week’s low, and below the February high. It would then have a big bear body. This would increase the chance of lower prices next week.
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 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 made a minor new low 2 days ago for the 1st time in 3 months and reversed up. That is noteworthy because it is a sign that the bears are stronger than they have been for a long time. The reversal up created a lower low double bottom bull flag at the EMA.
However, the 6 week tight trading range trumps everything. A trading range always has both a buy and a sell setup, but a trading range is a Breakout Mode condition.
A market can only be in a tight trading range if the bulls and bears are closely balanced. Traders know that reversals up and down are more likely than a successful breakout.
They also know that once there is a successful breakout, there is a 50% chance that it will be up or down. Until then, they will buy low, sell high, and take profits every few days
Today is Friday so weekly support and resistance are important
It is important to remember that today is Friday and therefore weekly support and resistance are important. The weekly chart has been sideways in a tight range for 6 weeks. The week’s open was in the middle of that range.
The EURUSD is currently only a few pips from the open of the week. This week is so far a doji bar, which is neutral, and it is in the middle of a tight trading range, which is also neutral.
The EURUSD might trade around the open of the week for the remainder of the day today. And then, at the end of the day, close either a little above or below the open. That close will slightly change the probability of next week’s direction.
If there is a small bull body, traders will see this week as slightly bullish. That would make traders wonder if next week will trade above this week’s high. This week would be a weak High 1 buy signal bar for next week.
Alternatively, if this week has a bear body, traders would see it a minimally good entry bar for a reversal down from below last week low. It would slightly increase the chance of lower prices next week.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market so far today is forming an inside day. The low is above yesterday’s low and the high is below yesterday’s high.
Also, the EURUSD is in the middle of the 6 week tight trading range. In the past 5 hours, there was a 30 pip rally and almost a 30 pip reversal back down. Day traders are scalping, waiting for a strong breakout up or down.
It is trading around the open of the week, which will probably be a magnet all day. Consequently, if the EURUSD is 10 – 20 pips from it, day traders will look for a reversal back to it.
While it is always possible that any day can become a strong trend day, it is less likely when the market has no energy and it is in the middle of a 6 week tight trading range and near an important magnet.
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 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 rallied in a wedge for a couple hours. This was a bear flag from yesterday’s bear trend.
It sold off briefly and continued in the TR for an hour. It then broke strongly to the downside. It poked below the 50 day MA and the 3000 Big Round Number and reversed up.
I have been saying that many bulls would not buy until after the Emini dipped below the 50 day MA. But now the bulls need a buy signal bar.
Although today had a big reversal up at midday, the bar on the daily chart had a bear body. Traders prefer to buy above bull bars, especially after a strong selloff. Many bulls will wait to see if Monday closes near its high and then buy. Traders wonder if the Emini might rally back to 3450 – 3500.
The bears hope that the Emini will break strongly below the 50 day MA to below the August low. It would then likely close the gap on the monthly chart. Also, September would be an outside down month. Traders would expect more sideways to down in October.
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.
