Emini and Forex Trading Update:
Friday January 17, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini gapped above the 3,300 Big Round Number yesterday, but spent most of the day going sideways. It was in a weak bull channel, but it trended up strongly into the close. The bulls want follow-through buying over the next few days. The bull trend is extremely strong on the daily charts. Traders continue to expect this melt up to continue higher, even though it is climactic.
Yesterday’s late rally was a Bull Surprise. Surprises typically have follow-through. However, the rally was so strong that bulls will look to take some profit by the end of the 2nd hour today. That typically will result in at least a couple hours of sideways to down trading by the end of the 2nd hour.
Today is Friday so weekly support and resistance can be important. This is especially true in the last hour. There are no important weekly targets nearby. Therefore, the bulls will simply try to get the week to close near its high. However, the bears want a conspicuous tail on the top of this week’s candlestick on the weekly chart. They will try to get a selloff in the final hour.
Overnight Emini Globex trading
The Emini is up 11 points in the Globex session and today will probably gap up. The open will likely be far above the EMA. When that is the case, many bulls are hesitant to buy, especially if the first few bars are not big bull bars closing near their highs.
Traders do not want to pay a price that is far above average for price action that is not far above average. Consequently, a big gap up usually results in an early trading range. The bears hope for a double top or wedge top and then a swing down.
The bulls want to buy closer to the EMA. Once the Emini goes sideways to down the to the EMA, they will look to buy a double bottom or a wedge bottom for a swing up.
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.
EURUSD Forex market trading strategies
The daily chart of the EURUSD Forex market sold off overnight to far below yesterday’s low. Yesterday was a Low 2 bear flag sell signal bar and the December lows are magnets below. Also, the January 10 buy setup was weak. The EURUSD will probably test those December lows next week.
By going below yesterday’s low, the EURUSD today triggered the bear flag sell signal. So far, the day is at its low and far below yesterday’s low. If today closes near its low, the EURUSD will probably continue down next week to those December lows, which are about 100 pips below.
The bears want a break below the November 29 low. That is the bottom of the 4 month trading range. If they get 2 closes below that low, they will then try for a break below the October low. That would be a new low in the 2 year bear trend and it would erase the possibility that the 4 month rally was the start of a bull trend on the weekly chart.
The EURUSD has been in a bear channel for almost 2 years, Traders have been buying below support and selling above resistance, expecting 2 – 3 week legs that are about 200 – 300 pips tall. Nothing has changed. There will be buyers around the December or October lows.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market has been selling off in a tight bear trend overnight. However, it lost momentum 2 hours ago. The bars have become smaller and the EURUSD has spent a couple hours in a tight trading range. That reduces the chance of it falling much lower today.
The bears will switch from selling at the market to selling rallies. Additionally, they will begin to take some profits around the low of the day. This loss of momentum reduces the chance of the trend continuing much lower today.
Also, the bulls will begin to look for reversals up for 10 pip scalps. But they will need bigger bounces before they have a reasonable chance of a bull trend reversal.
At the moment, a bull trend reversal is unlikely. Today’s bear channel will probably evolve into a 20 – 30 pip tall trading range for the remainder of the day before it falls much further.
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.
End of day summary
The Emini gapped to a new all-time high again today. It then entered a tight trading range and closed near the open. Since it is a small doji in a buy climax, it is a sell signal bar for Tuesday (Monday is a holiday).
The bull trend on the daily chart is becoming unusually extreme. That increases the chance of profit-taking within a couple of weeks. Because the rally is so unusually strong, once there is profit-taking, the bulls might wait a couple weeks instead of a couple days before buying again.
Since strong bull trends do not typically quickly reverse into bear trends, the downside risk is not great at the moment. However, the extreme rally increases the chance of a deeper and more protracted pullback than what the Emini has had in 4 months. Even if the bears get a 2 week pullback, the odds continue to favor higher prices.
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.
Hi Al, is the reason you consider the EURUSD Jan 10th bar a weak Buy signal bar because there was not an appropriate bottom, such as a double bottom or wedge, following the strong move down? And then yesterdays bar (which is almost a replica of the Jan 10th bar but a bear bar) would be considered strong sell signal because it followed a weak bull flag.
I had several problems with the buy setup. A tight bear channel usually leads to a minor reversal. Legs in trading ranges typically fall below at least some support. The buy signal bar had a small body and it did not close on its high. There were 2 big bear bodies 2 days before. All of these factors made a bounce less likely than a swing up.
Thank you Al. I always look forward to your analysis, it has made a huge impact on my trading.