Trading Update: Friday June 18, 2021
Emini pre-open market analysis
Emini daily chart
- Fell below Wednesday’s low, but reversed up and closed just above open.
- Yesterday is an Emini High 1 buy signal bar, but after 2 big bear days, and without a big bull body, it is a weak buy setup.
- However, it was a bad follow-through bar for bears looking for the start of a correction.
- There have been many selloffs over the past year. Most ended within a few days, and the bull trend resumed.
- Unless the bears get more bear bars closing near their lows, traders will expect another new high before there is a correction.
Emini 5-minute chart and what to expect today
- Emini is down 28 points in the overnight Globex session.
- It broke below yesterday’s low.
- This week is outside down from the all-time high on the weekly chart.
- Getting near the bottom of the 3-week trading range. That increases chance that bears will take some profits soon.
- If the selloff is going to be the start of a correction, the bears will need to show signs of strength.
- One sign would be getting the week to close below last week’s low, and on the low of the week.
- There is therefore an increased chance of a bear trend day today.
- The bulls always want the opposite. They will therefore look to buy a reversal up from below last week’s low, and the bottom of the 3-week trading range.
- They want the week to close in the middle third of the week’s range.
- Today will probably not be a big bull day since the bulls had 3 strong reversals up over the past few days, and the Emini is now breaking below all of those bottoms.
- When the market repeatedly tries to do something and fails, it often then tries to do the opposite. This increases the chance of lower prices over the next few days.
- Most days have at least one reversal, and that is likely today.
- Since the market is deciding if a reversal is starting on the daily and weekly charts, there is an increased chance of a trend day today in either direction.
- If there is a series of strong trend bars in either direction in the 1st hour, the odds of a strong trend day will go up.
- Today is Friday so weekly support and resistance can be important, especially in the final hour.
- There many magnets within reach today: last week’s high and low, this week’s open, this week’s high (which is the all-time high), the May 7 high, the open of the month, and the 4,200 Big Round Number.
Yesterday’s Emini setups
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- Turning down from a lower high major trend reversal on the weekly chart. It is also the right shoulder of a head and shoulders top.
- Breakout below the May 5 low at the bottom of a 2-month trading range. But, the EURUSD is still in the middle of the 11-month range.
- Yesterday was the 2nd consecutive big bear day. It increased the chance of lower prices next week.
- A 3rd consecutive big bear day closing near its low would be unusual within a trading range. The bears are likely exhausted, and many will take some profits soon. Bull scalpers will also begin to buy today, looking for a brief bounce.
- Therefore, today will probably be something other than a 3rd big bear day. If there is an early selloff, there will probably be a reversal up, to around the middle of the day’s range.
- Yesterday’s close was far below the May 5 low at the bottom of the 2-month trading range. That increases the chance of lower prices over the next week.
- However, there is often a bounce back up to the breakout point. Therefore, the EURUSD might test the May 5 low within the next few days.
- The bulls want the bear breakout to fail. If they get a bull bar closing near its high today, many bears will exit above its high.
- Since a 2nd leg sideways to down is likely, even if today is a bull day, traders will sell a 1- to 3-day bounce.
- Bears want strong breakout below November low, which is bottom of 11-month trading range, and then a measured move down to the January 2017 low, which is the bottom of the 7-year trading range.
EURUSD Forex trading on 5-minute chart
- Trading range overnight, but fell below yesterday’s low in a strong series of bear bars.
- Starting to bounce over past 5 minutes. Bears might be taking some profits after 2-day sell climax.
- Bears hope this 30-minute selloff will be the start of another big bear day. It will more likely attract profit takers.
- 3rd consecutive big bear day unlikely since still in 11-month trading range. Therefore, today will either be small bear day, a trading range day, or a bull reversal day.
- If it is a bull day, it probably will not be a huge bull day.
- The most common thing after an extreme climax is a trading range. Day traders will probably buy reversals up from selloffs and sell reversals down from rallies, and take quick profits.
- If there is a series of strong trend bars in either direction, they will swing trade. Most likely, the bears will use selloffs to take some profits, so big bear day unlikely.
- After 2 huge bear days, big bull day is unlikely, but the profit taking (short covering) could be strong.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
- The Emini gapped down and sold off in a bear channel, but formed many big overlapping bars. It was easier for bulls and bears to make money with limit orders, betting against breakouts. That made a reversal up likely.
- Reversal up from consecutive wedge bottoms and a breakout above an OO after a failed breakout below.
- Strong reversal up but not to a new high, and then entered trading range.
- Late bear breakout and the week closed near its low. Next week might gap down on weekly chart.
- If the bears keep getting bear bars on daily chart, traders will expect a correction. Once the Small Pullback Bull Trend on the weekly chart ends, the selloff will probably be 15 – 20%.
- Most reversal attempts are minor. Unless the bears get strong follow-through selling next week, this selloff will be minor as well.
See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.
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 Time
When I mention time, it is USA Pacific Time (the Emini day session opens at 6:30 am PT, and closes at 1:15 pm PT). You can read background information on the market reports on the Market Update page.
Hi Dr. Brooks,
I bought above bar 42, holding the position for a retest of the 36 high. The market created a lower high DT instead, and I was stopped out. I see that you drew the small purple line, which I assume is a micro wedge as a reason to exit out of the long trade. When do we respect a micro wedge and exit the trade versus holding onto the long trade like I did, and assume that three actual legs would be created?
Most traders should only swing trade. When the market is in a trading range, it is better to scalp. Therefore, most traders should avoid trading ranges unless the legs are big enough for a swing trade.
Trading ranges usually have 2 or 3 legs up and down and then reverse. If there is a reversal down from the top of the range after a couple legs up, it is usually better to exit.
Your trade was an example. The buy was a High 2, but the buy signal bar was a doji, and it was the 3rd consecutive doji. Also, it followed 3 big bear bars closing near their lows. This was likely to be a minor reversal up. That means traders should expect the rally to reverse back down. Therefore, once a trader saw that the rally was not particularly strong and it was turning down from the top of the range, it is better to exit.
Thank you Dr. Brooks.
I shorted the high of B40 for a swing down but ended up exiting
on B45, which was a bull BO. I did not rely on my swing stop.
Then I bought above B54 as the market went outside up and again was looking for a swing trade with a stop below the bull outside bar. I was stopped out when the market traded below my swing stop.
In summary, I exited early from a trade that made sense to hold onto and exited too late on a trade that was not that good.
Do you have any advice for such situations when swinging? Should I just go for the Walmart trade approach and not tamper too much with the swing stops?
please read my response to Bao’s question.
Thanks! Appreciate it
The response to Bao’s question is missing, though. Perhaps, it didn’t get posted.
Al, not in trading room this month. Can you explain why/why not B57 wasn’t labeled as good H2 at ema?
It was a reasonable buy, but I thought 56 was a Bear Surprise, and I thought there would be more bars sideways to down after a 16 bar bull micro channel. Also, I thought that the 45 L at the bottom of the ii was a magnet for a possible Final Flag. Finally, for a body that big, I would have prefered it to dip further below the EMA.