Emini and Forex Trading Update:
Thursday March 5, 2020
I will update again at the end of the day.
Pre-Open market analysis
Yesterday was a bull inside bar in last week’s reversal up from a sell climax. It is therefore a High 1 bull flag and a buy signal bar for today. Because the sell climax last week was so extreme, the bounce could last a couple of weeks. Therefore, traders expect at least another few days of sideways to up trading.
This is a bear rally. Traders should also expect it to disappoint the bulls. Yesterday was a 2nd leg up. That might be all that the bulls get. However, as long as there is no surprisingly bad news about coronavirus, this bear rally might continue for another week.
Tomorrow is Friday. The close of the weekly chart will be important. The bulls want last week to be a bear trap in a bull trend. They would like this week to close on the high. This week would then be a strong buy signal bar for next week.
But the Emini is more likely to be sideways to down for at least several more weeks. Therefore, this week will probably not close on its high. Even if it does, there will probably be sellers not far above its high.
Overnight Emini Globex trading
The Emini is down 60 points in the Globex session. It has been sideways for 3 days. On the 60 minute chart, there is a double top and a big gap down today will probably form a double bottom. It is therefore in Breakout Mode. Traders are deciding if the bear rally will continue higher or if the bear trend on the daily chart will resume.
Tuesday formed a bear channel on the 5 minute chart. A bear channel is a bull flag because there is a 75% chance of a bull breakout. Yesterday broke above it and rallied. Yesterday was a bull channel. That is a bear flag. Today will gap below it. After big moves up and down, traders expect reversals.
Also, while yesterday was a small 2nd leg up on the daily chart, it had a bull body. It is therefore a weak sell signal bar. There will probably be more buyers than sellers below its low.
In addition, the 60 minute EMA has been a magnet for a few days. It is around yesterday’s low. Consequently, even if there is a big gap down, the Emini will be near support. Also, it will be near the bottom of a trading range on the 60 minute chart. This reduces the chance of a big bear trend day. In addition, it increases the chance of a swing up at some point today.
Confusion is a hallmark of a trading range
When there are good technical reasons for a chart to go up and for it to go down, there is confusion. That is the case on the 60 minute chart.
When traders are confused, they take quick profits because they doubt a move will continue very far. They also buy low and buy more lower, and they sell high and sell more higher. This results in a trading range.
The 60 minute chart is in a trading range and the Emini will open near the bottom of the range. That reduces the chance of a big bear trend day today. The odds are that the Emini will be in a trading range today. But there will probably be at least a 2 – 3 hour rally at some point.
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.
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 has rallied extremely strongly from the bottom of the weekly bear channel. This week’s high is just above the top of the channel.
The bulls want the week to close above the bear channel. The top of the channel is bear trend line. If it closes far above the bear trend line, traders will begin to conclude that the 2 year bear trend has ended. They then would see the EURUSD as either in a trading range or in a bull trend on the weekly chart.
Yesterday was a bear inside day on the daily chart. It was the 1st pause in a 10 day bull micro channel. That makes it a High 1 bull flag buy signal bar for today.
As strong a trend as the bull micro channel is, it is unsustainable and therefore climactic. Also, the EURUSD is now at the resistance of the 18 month bear trend line, the 1.12 Big Round Number, and the top of the weekly bear channel. A big bear bar at resistance is a weak buy setup. Therefore, there probably will be more sellers than buyers above yesterday’s high. The bulls will probably take some profits within the next several days.
However, they have been so eager to buy that they have been buying above the low of the prior bar for 10 days. Many will be quick to buy at or below the low of the prior day. Consequently, the 1st reversal down will probably last only 1 – 3 days. With buyers below and probably sellers not far above, the EURUSD will likely go sideways for a week or so.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market rallied strongly overnight. It broke above yesterday’s high to trigger the High 1 buy signal on the daily chart. It also broke slightly above the 1.12 Big Round Number.
However, it has been going sideways for a couple hours. As I said above, this is a weak buy setup. Many bulls will begin to take profits above, expecting a pullback for a few days.
Since the bulls have been strong and they want the week to close above the bear trend line, the EURUSD might only pull back slightly ahead of tomorrow’s close. It might wait until next week to pull back for a few days.
The fight today will be over yesterday’s high, the 1.12 Big Round Number, and the weekly bear trend line. They are very close to one another. As strong as the overnight rally has been, traders might wait until the end of the day tomorrow to decide if the weekly EURUSD chart will close above or below the resistance. As much as the bulls want a close far above, this pause exactly at resistance makes a pullback likely over the next few days.
The overnight bull trend has been strong. Also, the weekly chart is important. That reduces the chance of a bear trend today. Traders will buy the 1st 30 pip pullback. But the EURUSD is stalling at resistance and tomorrow’s close is important. That reduces the incentive for a big rally from here today. Today will probably be mostly sideways in a 30 – 40 pip range for the rest of the session.
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.
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 opened with a big gap down. That made a Bear Trend From The Open unlikely. After a 2 hour wedge rally, the bears got their trend. The Emini reversed down to a new low of the day. The Emini bounced at a measured move down from the high to the open. It then resumed down to test the 3000 Big Round Number.
Tomorrow is Friday so weekly support and resistance can be important. That is particularly true in the final hour. Traders see 3000 as a psychological magnet.
Also, the open of the week is important. The bulls wanted this week to close near its high on the weekly chart. Traders may then have wondered if last week was a bear trap. It’s not. As I wrote last week, we’re going down, even if we stay sideways for several weeks. Traders now wonder if the week will close below the open of the week. This week would then be a bear Low 1 sell signal bar on the weekly chart.
With the week now near the open of the week, the week might be a doji bar. That is a one bar trading range. It increases the chances of more trading range trading tomorrow. However, like every recent days, there will probably be at least one swing up and one swing 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.
Al,
Question about yesterday’s chart. On Daily Setups you said, “ok to hold since not cc bear bars COL.” Is this a general guideline you use or was this specific to the situation? Thanks.
FYI: this comment came after the ES tried to breakout above the triangle.
Dave
That is a useful general guideline. A chart has 2 variables, time and price. Time can be important. The more sustained a strong move is, the more likely it will continue.