Emini and Forex Trading Update:
Friday January 29, 2021
I will update again at the end of the day.
Pre-Open market analysis
The Emini formed a big day yesterday after a big bear day Wednesday. While yesterday traded above Wednesday’s high, it closed below the middle of the range, and near the open. Big Down, Big Up, Big Down creates Big Confusion. Confusion is a hallmark of a trading range.
The Emini has been sideways for 3 weeks. While yesterday’s reversal up was good for the bulls, the Emini is still in a 4-week trading range. The bulls need follow-through buying today to convince traders that the bull trend is resuming. If instead it goes sideways, traders will wonder if it will reverse down from a lower high major trend reversal, and head and shoulders top.
The next few days will be important. If they are bull days closing near their highs, traders will expect higher prices in February. But if the Emini goes sideways for a few days and then sells off, traders will look for a test of 3,500 in February.
The odds always at least slightly favor a resumption of a trend, until there is a reversal with follow-through selling. Wednesday was a reversal down, but yesterday provided no follow-through selling. The bears need a couple consecutive big bear days to make traders conclude that a 10% selloff has begun. Until then, traders will bet on higher prices.
Today is Friday, so weekly support and resistance can be important. It is also the final trading day of January so monthly support and resistance can be important as well. This is especially true in the final hour. The bears want January to close below the open of the month. January would then have a bear body on the monthly chart. That would increase the chance of lower prices in February.
The bulls want the month to close above the open. They would prefer it to close at the high. The more bullish the month is, the more likely that the Emini will go higher in February.
Overnight Emini Globex trading
The Emini is down 20 points in the Globex session. This is just a couple points above the open of the month. With the big swings up and down over the past 2 days, the Emini might be forming a triangle. If so, it might be waiting for February to decide on the direction of the next trend on the daily chart. This reduces the chance of a trend day today.
The past 2 days had huge ranges. The range will probably be smaller, but still bigger than average. Because it has been oscillating around the open of the month for the past 2 days, and today is the last trading day of the month, the Emini might stay here all day today, and wait for the final hour to decide whether January will have a bull or bear body on the monthly chart.
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. 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 has both a double top, and a double bottom over the past 4 weeks, and this small trading range is at the bottom of a 2-month trading range. The bulls want trend resumption up to above the January high. The bears want a breakout below. Both expect a 300-pip measured move, based on the height of the 2-month trading range.
When a chart is in Breakout Mode, there is a 50% chance of a successful bull breakout, and a 50% chance of a successful bear breakout. The chart is slightly bullish for a few days, and then slightly bearish. But traders take quick profits because they can see that the market reverses every few days.
Since the EURUSD is at the bottom of the 2-month range, and yesterday had a bull body, traders expect a bounce. Yesterday was a bull inside day, and a buy signal bar for the 4-week double bottom. The EURUSD went above yesterday’s high overnight, which triggered the buy signal. But will today race up to above the January 22 high? Probably not.
Today is the last trading day of the week and of the month. Weekly and monthly support and resistance can be important, especially at the end of the day. So far, this week and this month have small bear bodies. The bulls want today to rally enough so that both will have bull bodies by the close.
However, the open of the week and the open of the month, are probably too far above for the bulls to achieve their goals. But if the bear bodies remain small, which is likely, they only slightly increase the chance of lower prices next week. The chart will still be relatively neutral.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market sold off and then reversed up overnight, but the range is small. So far, this is not the start of a strong bull trend.
However, by going above yesterday’s high, the EURUSD triggered a minor buy signal on the daily chart. If the overnight bull trend continues up to above the January 22 lower high, the bulls will look for continuation up next week. But with the EURUSD being in a small trading range for 4 weeks, today will probably not be a big bull day.
Since the overnight rally has been in a tight bull channel, day traders have only been buying. They will probably look to buy all day today. But a weak rally typically converts into a trading range.
Once there is a 20- to 30-pip pullback, traders will conclude that the bull trend evolved into a trading range. At that point, day traders will also look to sell. Since a strong reversal down is unlikely after the reversal up, the bears will only scalp. If the chart evolves into a trading range, the bulls will switch to buying 20-pip pullbacks, instead of buying High 1 and High 2 bull flags near the high.
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. 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 down and then rallied to the EMA and the open of the month. It reversed down from a wedge and a double top. It sold off to below Wednesday low and then entered a trading range around Wednesday’s low. Today closed near the low of the day and below Wednesday’s low.
This week was outside down and January had a bear body on the monthly chart. This increases the chance of lower prices next week.
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.
Dear Al,
Emini 5-min, is bar 5 a possible L2 which bears took this chance to use limit order to sell above bar 5 and trapped after bar 6?
After L2 failed by bar 6, is it good for the bulls to enter long by market order between the high of bar 5 and the low of bar 8?
Thank you.