Emini and Forex Trading Update:
Tuesday June 16, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini yesterday reversed up strongly from below last week’s low. For the bulls, yesterday is a buy signal bar on the daily chart. They see the 5 day selloff as a High 1 bull flag buy signal.
If today gaps up, there will be a 3 day island bottom. However, island tops and bottoms are minor reversal patterns.
The 3 day selloff was surprisingly strong. Therefore, if today triggers the buy signal by going above yesterday’s high, the breakout could be minor. That means another failed attempt to break to a new all-time high.
I have talked about the gap on the daily and weekly charts above the February 24 high many times. It is very big and not far above. That makes it an important magnet. Many traders want to see the Emini test into it before they are willing to look for a 15% correction. Yesterday’s strong rally and today’s likely big gap up make it likely that the Emini will try to get there within a week.
Overnight Emini Globex trading
The Emini is up 78 points in the Globex session. It will therefore open with a big gap up and create a 3 day island bottom. If today is not a big bear day, the rally will probably continue up to the gap above the February 24 high within a week.
A big gap up means that the Emini will be far above the EMA. Traders do not want to pay far above an average price unless the bars are much more bullish than average. Since yesterday was also a big bull day, the Emini is very overbought. That will further make bulls hesitant to buy aggressively on the open. They would prefer to buy closer to the average price.
What typically happens when there is a big gap up is that the Emini enters a trading range for the 1st hour or two. Once it gets closer to the EMA, the bulls will look to buy again.
The bears want the gap up to fail. They want a strong bear trend from the open. That is unlikely. The chart is telling traders that traders want a test of the February 24 gap. Therefore, if there is a strong selloff on the open, there would probably be a reversal up within a couple hours. Today is not likely going to be a strong bear trend day. Most likely, it will be either a trading range day or a weak bull day.
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 bounced yesterday after a 2 day selloff from a buy climax. The bulls want this to be a resumption of the bull trend. They are hoping for a strong break above the March high.
However, there is a micro double top and the June buy climax was extreme. Traders expect a 2nd leg down to the June 3 low. That is the bottom of the final strong buy climax, which is a magnet. Less likely, the pullback will test the May 1 neck line of the head and shoulders bottom.
Overnight EURUSD Forex trading
The EURUSD Forex market triggered a High 1 buy signal overnight on the daily chart by going above yesterday’s high. However, the breakout was small and the EURUSD has reversed down.
Traders expect a 2nd leg down after the June buy climax. They therefore believed there would be more sellers than buyers above yesterday’s high.
The daily chart has now been in a tight range for almost 3 weeks. The odds favor a lower high and then a test of the June 3 low and the EMA. Traders see this as a pullback in a bull trend instead of the start of a bear trend. That reduces the chance that the selloff will be strong and fall far.
The lack of conviction on the part of sellers will increase the amount of trading range price action during the leg down. Day traders will be willing to buy as well as sell. That has been the case overnight.
Today’s close is important
If today closes on its low, it will be a stronger sell signal bar on the daily chart. Traders would then suspect that the 2nd leg down has begun.
The bulls want today to close above the open and above yesterday’s high. That would increase the chance of at least slightly higher prices before a 2nd leg down begins.
The fight today will be over the close of the day. The bears will sell rallies and try to get the day to close near its low. However, the bulls will buy selloffs and try to get today to close above the open and possibly 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. 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 opened with a big gap up. That created a 3 day island bottom. However, it collapsed down to below yesterday’s high, closing the gap. It reversed up and entered a trading range.
The bulls hope that the 2 day rally will continue up to the February 24 gap and then to a new high. The rally has been surprisingly strong. Traders therefore expect it to go at least a little higher.
The bears will try to prevent a new all-time high. They want a 2nd leg sideways to down after the crash earlier this year.
Whether or not there is a small new high, the Emini will probably remain in its 2.5 year trading range for the rest of the year.
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.
Hi Al,
Just wanted to ask, why is a short entry below bar 4 (2 bear bar of the day) not a good entry?
I considered it a L2 short, the bar closed on its low, the price was much above EMA.
Of course one would need to reverse after the next bar closed, for a DB entry…
While it was a reasonable short, with the two dojis, it was higher probability to wait for consecutive bear bars before shorting. Those 2 dojis made a trading range open likely. In a trading range, selling low is bad unless you can use a wide stop and scale in.
Thanks Al. I’d forgotten about doji significance/implications on the open, when there were trend bars before/after them. Will keep it in mind henceforth.
Hi, Al
In encyclopedia, why distinguish trend reversal and opening reversal? I think trade the same both. What I can see the differences are Trend reversals have wedge Top and Bottom/DT/DB, and opening reversals are more likey climax reversals, right?
A trend reversal can come at any time.
An Opening Reversal is a reversal that comes in the 1st hour or two. It is sometimes a trend in one direction that reverses into an opposite trend. That is a trend reversal. At other times, the reversal can be of just a 1 or 2 bar move and not of a trend.
I see the Feb 24 High at 3312 on the ES E-mini, which is the gap down from 3339 … is that the correct target you are referencing?
In February the active contract was March. The active contract is now September. Charting software often combines data from the active contracts and eliminates the price differences. This means the important price levels you see on back-adjusted charts can be different from the actual prices when they happened in real time. Keep that in mind when looking at longer term charts and know that target prices can be less precise.
Thanks Andrew, I’m tracking the ES1! Continuous Contract.
I think it is around 3260 or 3270, Al had mentioned the specific price in one of the blog entries previous week..