Emini and Forex Trading Update:
Tuesday January 5, 2021
I will update again at the end of the day.
Pre-Open market analysis
Yesterday gapped up to a new all-time high on the daily, weekly, monthly, and yearly charts. However, the Emini immediately sold off and formed a big bear trend — a failed gap up.
Yesterday traded above Thursday’s high and then below its low. Yesterday was therefore an outside down day. In fact, this week is already an outside down week. Since Thursday was an outside up day, there are consecutive outside bars on the daily chart. This is an OO (outside-outside) setup, which is a Breakout mode pattern. Yesterday is both a buy and sell signal bar. If the Emini trades below yesterday’s low within the next few days, it would trigger the sell signal. However, yesterday had a big tail below. That creates uncertainty and increases the chance that today will be sideways.
Since there is a Spike and Channel Bull Trend on the daily chart, traders expect a test of the start of the bear channel. That is the November 10 low just below 3500. Yesterday might have been the start of a move down to 3500. The bears need a break below yesterday’s low to trigger the sell signal. They also need bear bars closing near their lows.
If the OO buy signal triggers this week, it would be coming late in a bull trend. The OO would probably be a Final Bull Flag, which means the rally would likely not go far before the Emini reversed down.
Overnight Emini Globex trading
The Emini is down 12 points in the Globex session. While the selling was strong yesterday, the Emini actually rallied for the entire 2nd half of the day, and it was basically in a trading range for 5 hours. Today is going to open within that range.
I have been saying for several weeks that the Emini might wait for the results of the Georgia senate races before making its next move. Those results might not be available until the end of the week.
Yesterday’s exhaustive sell climax led to a trading range. There is an increased chance of the Emini continuing yesterday’s trading range and staying within yesterday’s range today. Also, the big tail on the bottom of yesterday’s candlestick on the daily chart means that there might be buyers below yesterday’s low. That is true even though a break below yesterday’s low would trigger a sell signal on the daily chart.
Today will open around yesterday’s close and within yesterday’s trading range. Also, the Emini is in the middle of a 6-week trading range. Finally, there is uncertainty regarding the Georgia election. These factors increase the chance of more trading range trading. However, with yesterday’s range as big as it was, there will probably be swing trades up and down today, even if it is a trading range 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. 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 has been in a strong bull trend and there is room to a measured move target above. Also, the February 2018 high above 1.25 is another magnet.
However, the Small Pullback Bull Trend from the November 4 low has lasted about 50 bars, which is a long time. Traders are wondering if there will be a deeper pullback before the rally continues up to 1.25.
There was a wedge top last week and then a big 2-day selloff to the start of the wedge. The EURUSD is now testing the top of the wedge. The bears want a 2nd reversal down from a small double top. However, the bulls hope that the 2-day selloff was just a test of support, and that the bull trend is resuming.
With the EURUSD in a trading range between 1.20 and 1.23, it is in Breakout Mode. Traders believe there is a 50% chance of a successful bull or bear breakout.
Once there is a successful breakout, they will look for a 300-pip measured move. For the bulls, that would be far above their 1.25 target. For the bears, a 300-pip selloff would be a test of the bottom of the August/October trading range.
I have been saying that Forex markets often make big moves in early January. That may happen here. But until there is a breakout, traders will bet on reversals. They are buying low, selling high, and taking profits every few days.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market rallied a little early in the overnight session, but has been in a 30-pip trading range since then. Day traders are scalping. Today so far is a small inside day, which is neutral. I have been saying that financial markets might be waiting for the results of the Georgia senate races. Those results might not come until the end of the week.
While a breakout can come at any time, markets have inertia. They tend to continue to do what they have been doing. Day traders will continue to scalp until there is a breakout.
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. 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
The Emini formed a trading range for the 1st 2 hours. It then rallied from a double bottom and broke above last week’s low. Remember, this week is an outside down week and the bulls want to weaken the bearishness. One way is to have the week close above last week’s low. The Emini then formed a higher trading range. Today was a Bull Trending Trading Range Day.
Today was a bull inside day after yesterday was a 2nd consecutive outside day (OO, outside-outside, Breakout Mode). It is therefore an ioi bull flag buy signal bar. However, the OO is more important.
Also, the Emini is back in last week’s trading range. That increases the chance that it will go more sideways ahead of the Georgia election results. They will probably be available by the end of the week
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.
The S&P 500 wasted no time hitting the weekly expected move on Monday’s low from where it bounced.