Emini and Forex Trading Update:
Monday September 14, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini on Friday finally dipped below the 50 day MA. I have been saying that many bulls would not buy until they saw a reversal up from below the 50 day MA.
Friday was a reversal day but it had a bear body. In general, the bulls want to buy above a bull bar, especially after a strong selloff. They hope that today closes near its high so that it would be a better buy signal bar.
In any case, the bounce from the 50 day MA should test last week’s lower high on the daily chart at a minimum. That is also last week’s high and it is just above the 3400 Big Round Number. A 50% retracement would be around 3450.
The bears want the break below the 50 day MA to continue lower. If September trades below the August low, it would be an outside down bar on the monthly chart. That would increase the chance of sideways to down trading in October.
August gapped up on the monthly chart, but the gap was small. I said that small gaps usually close shortly after they form. If the Emini goes below the September low, it will probably close the gap.
If today closes near its high, it will be a buy signal bar on the daily chart. The bulls would then try to get a rally for several days back to 3450 -3500.
But if today closes near its low and far below the 50 day MA, the Emini will probably trade below the August low this week.
There is an FOMC meeting on Wednesday. Traders might not be eager to trade aggressively until after the announcement. Also, since the Emini is at important support, it might oscillate around the 50 day MA until Wednesday’s announcement.
Overnight Emini Globex trading
The Emini is up 38 points in the Globex market. It might gap above Friday’s high. There is a micro double bottom at the 50 day MA on the daily chart. Also, the daily chart is oversold. Traders expect the Emini to work high for at least a couple days.
If today does gap up, the gap will likely be small. Small gaps typically close in the 1st hour.
But even if the gap closes, traders expect higher prices for a couple days. Therefore, today is more likely to be a bull trend day or a trading range day than a bear trend day.
When there is a big gap up, the Emini is far above the 20 bar EMA, which is a measure of the average price. Traders do not want to pay far above the average price unless the bars are far stronger than average. There is a strong bull or bear trend from the open only 20% of the time.
Most of the time, a big gap up leads to a trading range open for an hour or two. The bulls will look for the Emini to go sideways to down to the moving average. They then will buy a reversal up, usually from either a double bottom or wedge bull flag near the EMA.
The bears will look for an early rally to fail. They want a double top or wedge top and then a swing down.
If there is a trading range open, traders will see the Emini as neutral. That reduces the chance of a trend lasting for the rest of the day. Therefore, they expect a breakout from a trading range open to last for a few hours and then either enter another trading range or reverse.
Friday’s setups
Here are several reasonable stop entry setups from Friday. 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 has been sideways for 7 weeks. The bulls want to break above last week’s lower high and then above the top of the range.
That lower high is also last week’s high. Last week was a High 1 bull flag buy signal bar on the weekly chart (not shown) and if this week goes above that high, it will trigger a minor weekly buy signal.
But last week was only a doji bar on the weekly chart. That is a weak buy signal bar. Also, the chart has been in a tight range for 7 weeks. That is a bad context for traders looking for the start of a trend.
Instead, most traders will assume that there will be more sellers than buyers above that weekly buy signal bar and daily lower high from 2 days ago. They know trading ranges resist breaking out and expect reversals instead of the start of a trend.
On the daily chart, today went above Friday’s high and triggered a minor High 1 bull flag buy signal. This will probably lead to a test of last week’s high within a couple days.
Wednesday’s FOMC announcement is a potential catalyst for a breakout up or down. But with the presidential election just a couple months away, the Fed will probably not say anything that will affect the financial markets.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market traded above Friday’s high and triggered a High 1 buy signal on the daily chart. But the EURUSD is in the middle of an 8 week tight trading range and reversals are more common than big breakouts. This is probably not the resumption of the July bull trend. It is more likely just another one of many small legs up and down in the 8 week tight trading range.
Today so far is the 4th consecutive bull bar and Thursday’s lower high is a magnet above. Traders expect the EURUSD to work up to that high today or tomorrow.
Even though today is trending up, it is doing so in a bull channel. While it is always easier for a day trader to make money buying pullbacks when there is a bull trend, the bears will also sell reversals down for scalps.
The day’s range is small and so are the legs. Day traders have been scalping up and down for 10 pips while they wait for a breakout up or down. If there is a breakout, up is more likely than down after 3 bull days and with a magnet above (Thursday’s lower 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. 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 and rallied, but reversed down from a parabolic wedge top. The selloff lasted most of the day and today was a Bear Trending Trading Range Day. The bulls got some trend resumption back up at the end of the day after a test of the 60 minute EMA.
I have been saying that the Emini would probably bounce for a few days from the 50 day MA on the daily chart. Additionally, I have said it will likely go above last week’s high and reach 3400 – 3500. At that point, traders will look for a lower high and then a 2nd leg down. It should fall to 3000 – 3200 within the next month or two.
Today was probably the start of the bounce, but the Emini might 1st go sideways into Wednesday’s 11 am PST FOMC announcement. It has been sideways now for 5 days and traders expect reversals every couple days.
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.
