Emini and Forex Trading Update:
Wednesday March 11, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini formed a double bottom on Monday on the 5 minute chart. Yesterday tested the low and reversed up. There is now a micro double bottom on the daily chart. Yesterday is a buy signal bar for today.
But consecutive big dojis is not a reliable pattern. It is trading range price action and it increases the chance of more sideways trading today.
Traders are deciding if this is the start of a strong 3 – 5 day short covering rally up to last week’s lower high above 3100. There might be one more leg down to a new low and a wedge bottom first.
A strong short covering rally should begin within a few days. It might begin today. There is therefore a slightly an increased chance of a big bull trend day today. The short covering will probably last at least a week. It could test last week’s lower high, above 3100.
If the bears do get 1 more new low on the daily chart, traders will buy it. The selloff has been unusually severe. A new low would be a 3rd leg down. Bears will cover shorts and bulls will buy. The result will probably be a sharp rally for several days.
Overnight Emini Globex trading
The Emini has been selling off in a weak bear channel overnight. It will probably open in the middle third of yesterday’s range. That increases the chance of a 3rd sideways day. Day traders will look for reversals.
If today is an inside day, it will create a Breakout Mode pattern of the daily chart. That means it will be both a buy and sell signal bar for tomorrow.
Everyone knows that a big trend up or down is more likely every day than before the recent volatility began. However, today is still more likely to be a trading range day.
The legs up and down have been big and therefore are good for swing trading. Since the bars legs on the 5 minute chart are very big, traders must trade small. They should not risk more on any trade than what they were risking a month ago before the increased volatility began.
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. 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.
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 daily chart of the EURUSD Forex market has rallied strongly for 4 weeks. However, 3 consecutive big bull bars late in a bull trend is typically an exhaustive buy climax. Many bulls will take profits and wait for a couple legs sideways to down before buying again.
There is a 50% chance of one more brief leg up before the 1 – 2 weeks of profit taking begins. Traders should expect a couple legs sideways to down.
The 1st target is the bottom of the most recent buy climax. That is the low of 4 days ago. Also, the pullback usually tests the EMA. It can get there by going sideways for a couple weeks or down.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market held above yesterday’s low overnight. If today is a bull bar on the daily chart, today will be a High 1 buy signal bar for tomorrow.
But, since there is now confusion, a trading range on the daily chart is more likely than a resumption of the bull trend. There were buyers below the low of 2 days ago. Even if today is a good looking buy signal bar, there will probably be sellers not far above its high.
This means traders are betting against trends and are looking for reversals. That is trading range psychology. Traders will also take quick profits since they are less confident that a trend up or down will get far.
Trading range price action on the daily chart increases the chance of trading range trading on the 5 minute chart. The EURUSD 5 minute chart has been sideways overnight. The legs up and down have been big enough for 20 – 30 pip scalps.
Since the daily chart has been in a strong bull trend, consecutive big bear days are unlikely. That limits the downside.
Also, that strong bull trend makes it likely that today will close above the open and probably above the midpoint. It therefore might make it easier to make money as a bull today. However, at the moment, the 5 minute chart is neutral. Day traders are scalping up and down.
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. 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.
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 bulls failed to break above yesterday’s high to trigger a buy signal. The Emini was in a bear channel today. That increases the chance that it has to go lower before there is a 1 – 2 week short covering rally. Traders might wait for the 2nd half of the month. That is the end of the quarter and there is often buying then.
The low of the day was just above the 2700 Big Round Number. Much more importantly, the cash index fell one point below 2708.92 and reversed up sharply. That is 20% down from the all-time high close. If the cash index closes below that price, the news would say that the 12 year bull trend had ended and that there was now a bear market.
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.
