Emini and Forex Trading Update:
Tuesday February 16
I will update again at the end of the day.
Pre-Open market analysis
The Emini on Friday broke above Thursday’s high, and triggered a High 1 bull flag buy signal, with buy climax accelerating up. Friday closed on its high and at a new all-time high, That increased the chance of a gap up this week on the weekly chart. While yesterday was a short day because of the holiday, it did gap up above last week’s high.
But the gap on the weekly chart is small. Small gaps usually close before the bar closes, which means before the end of the week. Also, the day after a small day has an increased chance of beginning an outside up, or outside down day.
The daily chart is in a strong bull trend, and it has been accelerating up for 2 weeks. That creates a parabolic wedge buy climax, and it increases the chance of a deeper pullback, like after the buy climaxes that ended on September 2 and October 12.
It is important to note that buy climaxes can go much higher than what seems likely. There is no sign of a top. Traders will continue to expect higher prices until the bears get consecutive big bear bars on the daily chart. Even then, traders will still look to buy after a couple weeks down. However, the odds of a 10% correction beginning soon are increasing.
Overnight Emini Globex trading
Some computers are ignoring yesterday’s trading because the stock market was closed yesterday. While today is currently down about 5 points from yesterday’s close it is up 14 points from Friday’s close.
Most day traders will see yesterday’s bars on their day session charts. It is usually best to trade the chart in front of you, and not spend time wondering if more computers will ignore yesterday. Since I see yesterday on my day session chart, I am treating yesterday like any other day.
Today is currently just a few points below yesterday’s low. If today gaps down, the gap will probably be small. Small gaps usually close in the 1st hour.
If there is a gap down and it stays open, yesterday will be a 1-day island top in an extreme buy climax on the daily chart. Because there is a growing chance of a 10% correction, there is an increased chance of a couple consecutive big bear days coming soon. But until then, traders will continue to expect every selloff to be a buying opportunity.
Friday’s buy climax was extreme. Bull trends frequently end with an extreme buy climax on the 5-minute chart. It often takes a few days before traders decide if the trend is ending. Therefore, there is an increased chance that today will continue yesterday’s trading range trading.
Can today resume up to above 4,000? That is what this 2-week rally is about. Yes, it can, but because the Emini is so overbought, there is a 50% chance of a 10% correction beginning from around here, or from just above 4,000.
Friday’s setups
Here are several reasonable stop entry setups from last Friday (pre-holiday). 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 rallied for a couple weeks. The bulls want the rally to break strongly above the January 22 lower high, and then above the January 6 high. But the past 5 days have had small bodies, which represents a loss of momentum. It is more likely that the EURUSD will sell off for at least a few days. Since there are not 3 clear legs up on the daily chart, the rally might reach the January 22 lower high before the leg down begins.
While the rally is not strong, it is strong enough so that many bulls will buy about a 50% retracement, or around the February 5 low. Therefore, the 1st reversal down will probably bounce after a few days.
Weekly and monthly charts are important
Traders are deciding if the 3-month trading range is just a protracted bull flag in last year’s bull trend on the daily chart. There is a consensus on TV that it is.
However, there is also a clear wedge top on the weekly chart, and a double top on the monthly chart, and the TV experts are completely missing the reality that higher time frames are important. While the odds favor higher prices after last year’s good bottom on the monthly chart, it is currently more likely that the weekly chart will test 1.16 before there is a strong break above the 6-year trading range on the monthly chart.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market rallied above last week’s high, and then sold off sharply over the past hour. The selloff is strong enough so that day traders are now only selling. Traders are wondering if today will be the end of the 2-week rally.
The EURUSD has been sideways for 5 days, and this selloff is still within the trading range. If the bulls can stop the selling and create a trading range, day traders will also look to buy reversals up for scalps. But at the moment, it is likely that the EURUSD will be sideways to down for the rest of the day.
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 rallied from a parabolic wedge at the EMA on the open, but then sold off from a double top. After a Spike and Channel down to a measured move, it reversed up from a wedge bottom. It then went sideways.
Today was a bear bar on the daily chart. Since late October, the bulls have bought the day after a bear day. But because the Emini is at the top of bull channels on the daily and weekly charts and is extremely overbought, the odds favor a 10% correction beginning soon. If tomorrow is a 2nd consecutive bear day and if it is big, traders will conclude that the Emini will pull back for at least a couple weeks.
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.
Dear Al,
Why isn’t bar 62 a swing sell setup for DT? Comparing with bar 15, what is the difference?
Thank you.
The probability was less after a 2-hour trading range,7 bull bars, and a strong low of the day, but yes, it was a swing setup.