Emini and Forex Trading Update:
Wednesday November 18, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini pulled back yesterday, but reversed up from below Tuesday’s low. It is therefore a buy signal bar for today. However, the bull body was small on the daily chart, and that is a weak buy signal bar. But if today becomes a strong bull day, traders will expect a break above last week’s all-time high within a few days.
It is important to note that a rally today would form the 3rd leg up from last week’s low. If the Emini went up today but reversed down within a couple days, there would be a micro wedge top on the daily chart. In addition, the rally would be the 2nd leg up in a double top with last week’s high. That would make traders look for at least a couple small legs down next week.
So far, this week is a small doji inside bar on the weekly chart. That increases the chance of more sideways trading for the rest of the week. But one big bull or bear day can dramatically change the appearance of this week’s candlestick.
Overnight Emini Globex trading
The Emini is up 6 points in the Globex session. Since yesterday is a High 1 buy signal bar and today should open relatively near yesterday’s high, day traders expect today to trade above yesterday’s high. That would trigger the daily buy signal.
Because the setup is not strong, traders are not expecting a big bull trend. But if a breakout above yesterday’s high comes from a series of strong bull trend bars on the 5-minute chart, there would be an increased chance of a big bull trend day today.
Can today be a big bear day, whether or not it triggers the buy signal? Yes, but after 3 bull days and with last week’s high being a magnet just above, the odds favor sideways to up.
I have made the point many times over the past few weeks, that most days have closed near the middle or open of the day. Since markets have inertia, day traders should expect that again today. But if there is a strong trend in either direction, day traders will bet on the trend continuing all 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 rallied for 4 days, and the rally is an adequate test of the top of last week’s strong rally. The chart is back to neutral after being bullish for a couple weeks. Traders are now deciding it the bulls will get a successful breakout above the September 10 high, or if the double top will lead to a reversal down. The shrinking bodies over the past 4 days is a sign of a loss of momentum as the rally tests the September 10 high a 2nd time. That increases the chance of at least a small test down over the next couple days.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market rallied strongly early overnight but then reversed back down to open of the session. The reversal down has been strong enough so that traders do not expect a rally back up to the high of the day.
The bears want the day to close either around the open or the low of the day. With the strong reversal down on the 5-minute chart and the shrinking bodies on the daily chart, today will probably not be a bull trend day. That means it is likely to be either a bear trend day or a trading range day.
While the selloff of the past 5 hours has been good for the bears, the EURUSD fell only 40 pips. That is not a strong bear trend. Consequently, traders are not looking for a big bear day at the moment. That leaves a trading range day as the most likely outcome.
So far, today’s high is below yesterday’s high, today’s low is above yesterday’s low, and the EURUSD is trading around the open of the day. This behavior is consistent with a trading range day. However, the bounces over the past 5 hours have all been less than 15 pips. Therefore, day traders are currently only looking to sell. The bear swing has not yet ended.
But if the 5-minute chart starts to go sideways for an hour or has a 20-pip bounce, day traders will also look to buy again. This is likely since yesterday was a small, sideways day, and today so far is even a smaller day.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
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.
End of day summary
Today the Emini was in a trading range for 4 hours. There was then a bear breakout and it continued down for the rest of the day to below the September high.
Most of the time when there is a breakout below a trading range, it is brief and it leads to a lower trading range. That is a Bear Trending Trading Range day. That happened to day for about an hour and a half, but then the Emini collapsed into the close.
In the chatroom, I have been saying that the 5 day rally was likely to be a bull leg in a trading range instead of a resumption of the bull trend, and that the big bear day from last week was likely to have a 2nd leg down. Today is a good candidate for the start of that 2nd leg down.
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.
E-mini daily chart and reference to summary that today could be a good candidate for a second leg down. Why isn’t 11/12 considered a second leg down and today a good candidate for a third leg down? Thank you very much for explaining.
It was possible that November 11 was a pullback from the 1st leg down and November 12 was the 2nd leg down, but that possibility disappeared once the pullback continued above the November 11 high. Then the rally to Monday’s high was the end of the pullback from the 1st leg down to the November 9 low. Pullbacks are often complex, which means they can contain several smaller legs.
Hello Al, What are your thoughts on “moving to breakeven” after +5 ticks on ES ? Lately I have missed out on some good moves because I get bounced out and then market goes without me. In the past I always scalped for +4 ticks so it was not an issue. Now I am doing more swing trades and also scalping half and swinging half . Should I avoid moving to breakeven so tight ? Any thoughts would be appreciated. Thank you
When the bars and daily ranges are big, 5 ticks is too tight. For a swing trade, traders expect at least 2 legs. That means they expect at least one move against them, and that move often falls below the entry price. As long as the premise is still valid, I would not think about a breakeven stop until after a 2nd leg in my direction.