Emini and Forex Trading Update:
Friday June 12, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini crashed yesterday on the 5 minute chart. The selloff on the daily chart began in the sell zone around the March 3 high.
Because the range was big, traders expect at least some follow-through selling at some point within a week or so. At the moment, many traders believe the pullback will reach around the 2800 bottom of the early May trading range.
Yesterday was extremely climactic. A bear channel is a bull flag. Today should have at least a couple hours of sideways to up trading. But there is often some follow-through selling on the open after a big bear day.
It is unlikely that the bears will get a 2nd big bear day. If they did, that would make traders expect a big, fast reversal down over the next several weeks.
The bulls want today to be a bull day. They especially want a big bull day closing on its high. That would increase the chance that yesterday was just a sell vacuum test of the 200 day moving average. Traders would then wonder if it was a bear trap. The bulls would be more inclined to buy again next week. Traders need more information today and Monday to decide if yesterday was the start of a correction or just a brief test of support.
Today is Friday. The bears want the week to close on its low and below both last week’s low and the 3000 Big Round Number. The bulls hope that yesterday was a bear trap and that today rallies strongly. But unless today is a strong bull day, traders will expect sideways to down trading for a couple weeks.
Overnight Emini Globex trading
The Emini is up 50 points in the Globex session. It will therefore gap above yesterday’s bear channel. It will open around the 20 day EMA, which is support. Furthermore, it will have retraced about half of yesterday’s selloff.
Because yesterday was in a tight bear channel, the 1st reversal up usually leads to a trading range. Therefore, the Emini will probably be sideways for at least a couple hours today.
Yesterday’s low was a pullback to the 200 day moving average. The bulls want an immediate reversal up. There is therefore an increased chance of a bull trend day today.
With today opening in the middle of yesterday’s range, there is a reduced chance of a big bear 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 has been sideways for 6 days after last week’s buy climax. That buy climax was the biggest consecutive bull days coming late in rally. The bulls see it as an opportunity to take surprisingly big profits.
The profit taking usually temporarily ends the bull trend. Traders expect a couple legs sideways to down. So far, the correction is sideways.
It typically tests the bottom of the 2 day buy climax, which is the June 3 low of 1.1167. However, if there are a couple sideways legs, the bulls will look to buy again, hoping to break above the March high.
If today is a bull day, it would be a High 1 bull flag buy signal bar for Monday. The rally is in a Small Pullback Bull Trend. Many bulls will buy above today’s high.
However, traders expect at least a small 2nd leg sideways to down. This would therefore be a low probability buy setup.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market traded below yesterday’s low overnight and then bounced. Today so far is sideways. Day traders have been scalping.
The context on the daily chart makes sideways price action likely for at least a couple more days. That makes trading range trading likely on the 5 minute chart.
Since today is a potential High 1 buy signal bar for Monday, the bulls want today to close nears its high. That would increase the chance of higher prices next week
The bears want today to close near its low. There would then be consecutive bear days closing near their lows. That would increase the chance of lower prices next week.
Since the EURUSD has been sideways for 6 days, today will probably be neutral. That means it will probably close around the open and have either a small bull or bear body. Traders would then wait for next week to decide if the bull trend will immediately resume or if the pullback will test the buy climax low.
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
After a big gap up, the Emini sold off to below last week’s low. It oscillated around that price for the rest of the day. It closed above last week’s low.
That weakens the bear case. Traders see the 2 selloffs today as forming a lower low major trend reversal. The bulls want follow-through buying next week.
This week was an outside down bar on the weekly chart. It is therefore a sell signal bar. The bears will try to trigger the weekly sell signal by having Monday trade below today’s low.
Today’s big gap up and 2 rallies reduce the chance of a big selloff on Monday. They generated confusion and confusion usually leads to trading range price action.
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.
Wild week in the market! Market exuberance quickly turned to market desperation, forming an island top. Would you consider this an example of the market causing the most pain possible to facilitate trades?
It always does. Last week’s rally was a final short squeeze, and Thursday’s selloff caused the bulls to exit in a panic. This behavior compels a lot of traders to make trades that they do not want to take. That is my favorite type of trading because the moves are big and relentless.