Emini and Forex Trading Update:
Tuesday March 31, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini rallied in a weak Bull Trend From The Open yesterday. It then went sideways for several hours. There was late trend resumption up, and the Emini broke above yesterday’s high late in the day. That triggered a High 1 bull flag buy signal on the daily chart. Since the buy signal bar had a bear body, there might be sellers not far above.
Because last week is a buy signal bar on the weekly chart, the bulls would like this week to close above last week’s high. That would increase the chance of higher prices next week. So far, this week is an inside bar on the weekly chart. The market might wait for Friday’s unemployment report before making a big move up or down from here.
Today is the final day of the month and of the quarter. No one knows whether or not the institutions completed their end of the quarter window dressing yesterday. They probably did not. That increases the chance of a bull day today. The bulls would like the month to close above the month’s midpoint of 2653. The bears want March to close below the 12 year bull trend line, which is around 2600.
It is important to note that whenever something is obvious, it might already be priced in. That increases the chance of the opposite. If today starts to sell off strongly, day traders should short, despite the idea that there should be window dressing buying through today’s close.
Resistance is a magnet
The next important target is the March 13 close of 2697.25. That day was a huge bull trend day, but the next day gapped far below that close and the Emini collapsed over the next week.
Last week’s rally was strong enough for traders to expect tests significant resistance, and that close is significant enough. Bulls who bought it believed that the selloff was extreme. They bought more at last week’s low.
Many were disappointed by that final selloff. They will then look to sell part or all of their position on a rally to around that close. The bears know that as well and many will also sell there. If enough traders sell around the same price, the Emini could pull back for several days.
Overnight Emini Globex trading
The Emini is down 28 points in the Globex session. So far, there have been more sellers than buyer’s above Friday’s high. While it was a buy signal bar, it was a doji bar just below the resistance of the 20 day EMA and at the magnet of the 2600 Big Round Number.
Can the overnight bear trend continue all day? It is more likely that the Emini will continue sideways more into Friday’s unemployment report. It has been sideways now for 3 days.
Also, yesterday was a bull channel. There is 75% chance of a break below the bull channel and then an evolution into a trading range.
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 (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 daily chart of the EURUSD Forex market continued yesterday’s selloff overnight. There is a lower high double top bear flag with the March 16 high.
Traders know that most reversals over the past 2 years have had at least a small double top or double bottom. However, they also can see that the last couple reversals were abrupt. The bears are selling, hoping that this one will be abrupt as well.
It is more likely that it will be like 90% of past reversals. That means traders will probably buy a 2 – 3 day pullback and look for a test of Friday’s high. They would like to test up to the March 16 high.
An expanding triangle is a type of triangle. All triangles are trading ranges. Markets in trading ranges spend most of their time in the middle third. This further increases the chance that the 2 day selloff will not grow into a bear trend.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market sold off from yesterday’s close overnight. It fell below Friday’s low and bounced sharply 50 pips over the past 2 hours. That is enough of a bounce to make bulls willing to buy pullbacks. They will bet that the 2 day selloff is evolving into a trading range. They hope that today becomes a reversal day and closes around the open.
However, the overnight bear trend was in a tight bear channel. The 2 hour rally is the 1st reversal up. Traders expect it to be minor. They know that a strong bear trend does not typically reverse into a bull trend without some kind of a trading range and double bottom 1st.
They also know that the 1st pullback from the strong 4 day rally will likely last only 2 – 5 days. That increases the chance of a major trend reversal up today and a rally back to around the open. They therefore will be willing to swing trade part of a long position if there is a good looking test of the overnight low. That would be a credible major trend reversal.
Traders should expect the strong rally to stall within the next hour and for the 5 minute chart to enter a trading range for an hour or two. The bulls will look to buy a reversal up from the bottom of that range for a possible higher low major trend reversal up.
However, the bears will look to sell a double top or wedge rally in the developing trading range. They want a 2nd consecutive day closing near its 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. 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
By trading above last week’s high, the Emini triggered a buy signal on the weekly chart. The bear trend on the weekly chart has been strong and last week’s candlestick had a big tail on top. This is therefore a weak buy setup. There were more sellers than buyers above last week’s high.
The Emini has not had a pullback in 6 days. It is now at the resistance of the 20 day EMA. Also, today had a bear body. These factors make it likely that the Emini will pull back tomorrow to below today’s low. Since the Emini has been sideways for 4 days, it might continue mostly sideways into Friday’s April unemployment report.
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.
Al: Does this summary mean end of short cover bear rally.
In order words from here we will see lower lows?
Thank You,
The market will probably be in a trading range for a decade. That means tops and bottoms are less certain. No one has much confidence about anything while the market is in a range.
The range is now between 2200 and 3400. It will probably grow to 1800 to 3600 at some point. There will be at least one new low and probably more. There might be one or more new highs in the next 10 years. Traders will look to buy low and sell high because they only thing that is fairly certain is that there will be buyers as it goes down and sellers as it goes up.
Will the market make a new low this week? Probably not. There will probably be a higher low and a 2nd leg sideways to up. The Emini will likely test 2700 before making a new low.
Will there be a new low in April? Maybe 50% chance. But there is a 70% chance that last week will not be the final low.
Will there be a new high within 2 years? Maybe a 30% chance.
Al: Excellent !!
Could not have asked for a better explanation
Many Thanks,