Emini and Forex Trading Update:
Tuesday November 10, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini broke far above the all-time high yesterday. This created a gap up on the daily and weekly charts. However, while the day was up about 1.4%, it was a big bear bar on the daily chart. Many bulls saw the big gap up as an opportunity to take surprisingly big profits. It closed back below the September high, which was the former all-time high.
The bears obviously want the breakout to fail. They need one more big bear bar on the daily chart to persuade traders that they can take control.
Whenever there is a gap up, traders watch for a gap down over the next week or so. The bears would see that as creating an island top with yesterday’s gap up. That would increase the chance of at least a minor reversal down.
The bulls do not want follow-through selling today. They would like today to reverse up early and erase all of yesterday’s selloff. However, yesterday’s late collapse was strong. The bulls will probably need to stop the selling and create a trading range before they can create a trend up.
What is most likely after a big gap up and a big reversal down? Big Up, Big Down creates Big Confusion. Confusion is a hallmark of a trading range. There is an increased chance of the Emini being mostly sideways for at least a day or two. Since the 7-day rally was extreme, it might have to go sideways for several days before traders decide whether it will resume up or reverse down.
Overnight Emini Globex trading
The Emini is down 14 points in the Globex session. It could therefore gap below yesterday’s low. Yesterday would then be a 1-day island top at the all-time high. It could also close the gap up on the weekly chart. But that is not particularly bearish. In this summer’s rally, there were 6 weekly gaps up and 4 quickly closed, yet the rally continued up all summer.
While that sounds good for the bears, small gaps usually close in the 1st hour. Also, as I said, the Emini will probably have to go sideways for at least a day before traders decide on the direction of the next move.
It has been in a small range overnight. The uncertainty makes a trading range day likely today. There should be at least one swing up and one swing down today.
A strong trend day is less likely. Trend traders want to see an early series of trend bars up or down. If they do not get that, traders will expect a trading range day, which is 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. 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 is near the top of its 4-month trading range. Yesterday reversed down in an outside down day. The bears see yesterday as a failed breakout above the September 10 high. They want this to be a double top and an Expanding Triangle top. The odds of a reversal down will go up if today is a 2nd consecutive big bear day closing near its low.
But the 4-day rally was strong. The bulls should get at least a small 2nd leg sideways to up this week. They want today to have a bull body. It would then be a better High 1 bull flag buy signal bar for tomorrow.
Everyone knows that there will eventually be a successful breakout of the 4-month trading range. In a trading range, reversals are always more likely. There have been many strong legs up and down for 4 months and each has reversed.
There is currently no reason to believe that the current rally will lead to a breakout above the September 1 high, or a reversal down will successfully break below the November 4 low.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market has been in a small range overnight. Since yesterday was an outside-down day at resistance, it is a sell signal bar for today. Today traded below yesterday’s low, which triggered the sell signal.
However, it only dipped slightly below that low before reversing up. This so far is a weak sell signal on the daily chart.
But the reversal up was weak as well. Traders are deciding if the EURUSD will reverse down from resistance or have at least a small 2nd leg up after a 4-day rally.
Today will help them to decide. If today collapses, then traders will conclude that the EURUSD will head down. But if it does not, traders will expect at least a small bounce up this week to again test the September 10 high.
With the small overnight range, day traders have been scalping up and down. The fight today will be over today’s open and yesterday’s low. The bulls want today to have a bull body. That will increase the number of traders who will buy tomorrow. But if today has a bear body and closes below yesterday’s low, traders will look for at least slightly lower prices tomorrow.
Can today break into a trend? Yes, but since it triggered a sell signal and did not collapse or reverse up strongly, today will probably remain small and sideways.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
I will post chart after the close.
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
Today sold off on the open from a double top, and closed the gap on the weekly chart. The Emini then reversed up from a wedge bottom and a 2nd test of last week’s high. After a Low 4 rally to a new high, the Emini entered a trading range.
Today is a buy signal bar on the daily chart for a pullback below the September high. But because it was not a big bull bar closing on its high and yesterday was a big bear day, this is a minor buy setup. The Emini might have to go sideways for at least one more day before the bulls will be eager to buy again. They might want a micro double bottom.
The bears hope that yesterday was a failed breakout of the 4-month trading range and the start of a bear trend. It is important to note that yesterday made a new all-time high but closed below the old high. With the strong 7-day rally, this is probably a minor reversal down. The bears will need at least another big bear day before traders start to look at this as a reversal instead of a pullback.
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.
