Emini and Forex Trading Update:
Thursday December 10, 2020
I will update again at the end of the day.
Pre-Open market analysis
Tuesday traded below Monday’s low and then above its high. It was therefore an outside day. Yesterday reversed down from above Tuesday’s high and traded below Tuesday’s low. It was therefore an outside down day. Consecutive outside bars.
Consecutive outside days is an OO (outside-outside) pattern, which is a Breakout Mode pattern. On a smaller time frame, it is an expanding triangle. Many traders will buy above the pattern and sell below. Therefore, yesterday is both a buy and sell signal bar.
It sometimes takes a few days for either signal to trigger. The day after a big outside day is often an inside day. That then creates an ioi (inside-outside-inside) pattern, which is another Breakout Mode setup.
When an OO comes late in a bull trend, it is often the Final Bull Flag. Therefore, a bull breakout will probably not get very far before reversing down.
Since the Emini is overbought, there is a higher probability that the sell signal could lead to a selloff that could last a week or more. Remember, I have been saying that the Emini would rally in the 1st half of December and then probably reverse down in the 2nd half. This could be the start of that reversal.
Overnight Emini Globex trading
Today is rollover day. That means March is now the front month. However, most day traders will continue to trade the December contract today because December will still have much more volume. They will switch to March tomorrow.
The bears want today to be a 2nd consecutive big bear day. But the Emini is down only 9 points in the Globex session. While it might gap down, which would trigger the OO sell signal on the daily chart, the gap would be small. Small gaps typically close in the 1st hour and are usually insignificant.
The bears want a 2nd consecutive big bear day. However, that only happens 25% of the time on the day after a big sell climax day. If today is a bear day, it will probably be a weaker type of bear trend, like a Trending Trading Range Day or a Broad Bear Channel.
Can today reverse up from below yesterday’s low to above yesterday’s high? Today would then be a 3rd consecutive outside day. That is rare and therefore unlikely. However, the bulls would like today to close near its high. The bulls will then see it as a buy signal bar for tomorrow.
On the day after a sell climax day, there is a 75% chance of a couple hours of sideways to up trading beginning by the end of the 2nd hour. Because yesterday was a big bear day in an overbought market, if today is going to trend, down is slightly more likely.
However, day traders know that there will probably be early trading range trading. They will look to buy a double bottom or wedge bottom, and sell a double top or wedge rally. There will probably be at least one swing up and one swing down today.
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 is pulling back from a strong breakout above a 4-month trading range. Today so far is an inside day, and yesterday was an outside day. This is an ioi (inside-outside-inside) Breakout Mode pattern. Additionally, it is a 2nd attempt to resume up (yesterday was the 1st) and therefore a High 2 bull flag.
If today closes near its high, it would be a sign that the bull trend is likely to resume tomorrow. Today would be a reasonable buy signal bar for tomorrow.
The bears see last week’s rally as a buy climax. They want it to fail and for the EURUSD to reverse down to the November low. The reversal down so far is small, but it has 4 bear bars and there is not yet a strong buy setup. They hope to continue to prevent good buy signal bars and to have the pullback grow endlessly (Endless Pullback) into a Small Pullback Bear Trend.
Last week’s breakout was strong enough to make at least a small 2nd leg up likely. But it was extreme, and this could result in the pullback lasting a few more days. It might have to test the September 1 high (Breakout Test) before the bulls become aggressive again.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market rallied overnight from yesterday’s open. However, the rally is part of an Expanding Triangle, which is a type of trading range. Therefore, day traders have been selling as well as buying, and they have been looking for quick profits.
Today will probably be all about the close. Since today is a potential buy signal bar for tomorrow, the bulls want the day to close near its high. The bulls will continue to buy pullbacks to make that happen.
The bears will sell whenever today is near the high. They do not want today to close near the high because they know traders will then be more willing to buy tomorrow. It would increase the chance that the bull trend on the daily chart will resume.
What happens if today has a bull body on the daily chart, but it has a prominent tail on top? It would be less bullish, and the EURUSD would be less likely to resume up tomorrow. But it would increase the chance that the selloff is ending and that a small trading range beginning, and reduce the chance that tomorrow will be the start of another strong leg up.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
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.
End of day summary
Today gapped down below yesterday’s low, which triggered the OO sell signal. Small gaps usually close in the 1st hour. This one close on the 2nd bar. The bulls got a Final Bear Flag reversal, but the Emini then went sideways for the rest of the day.
Today is a High 1 buy signal bar for tomorrow. Tomorrow should trade above today’s high to trigger the buy signal. The bulls hope that the OO sell signal is a bear trap and that the bull trend is resuming. The bears hope that there will be sellers not too far above today’s high and then a 2nd leg down.
Tomorrow is Friday and weekly support and resistance can be important, especially in the final hour. The open and low of the week are the most important prices. The bears want a bear body on the weekly chart. If the week closes on the low, it will be a sell signal bar on the weekly chart. The bulls want the week to close at another all-time high.
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.
