Emini and Forex Trading Update:
Monday January 25, 2021
I will update again at the end of the day.
Pre-Open market analysis
Friday pulled back from another new all-time high going into the final week of January. Because it had a bull body, it is a High 1 late in bull channel buy signal bar. But Friday had a prominent tail on top, and the Emini is at the top of channels on the daily, weekly, and monthly charts. This makes it a weaker buy signal, and it increases the chance of more sideways trading again today.
The bull channel has lasted more than 50 bars on the daily chart, which is a long time. That increases the chance of a break below the bull trend line and then a transition into a trading range. However, traders keep buying pullbacks, and they keep getting new highs. They will continue to buy until there is a credible top, or a surprisingly big reversal down.
Overnight Emini Globex trading
The Emini is down 1 point in the Globex session. It will probably open within the middle of yesterday’s range. Yesterday (Friday) was a trading range day, as were most days over the past 2 weeks. That increases the change of another trading range day today.
This is the final week of January. Traders are starting to think about how January will look on the monthly chart. Everyone knows that the bull trend has been extremely strong on the weekly and monthly charts. That makes traders wary of a possible profit taking selloff coming at any time.
However, with most recent days having both at least one swing up and one swing down, traders will expect another mostly sideways day today. But if there is an early series of strong trend bars in either direction, they will look for a possible trend day.
Friday’s setups
Here are several reasonable stop entry setups from Friday. 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 been in a trading range for 2 months. A trading range always has both a credible buy and sell setup. The bulls want the 5-day rally to be a resumption of the bull trend. However, the rally lacks consecutive strong bull bars. It looks more like another leg in the trading range instead of the start of a bull trend.
The bears see the rally as a pullback from the selloff from the January high. They expect it to soon fail, and for another move down to begin. The lower high could be the start of a major trend reversal. It would be the right shoulder of a head and shoulders top.
In a trading range, it is easy to only see one argument. But it is important to understand that a market can only be in a trading range if the bulls and bears are equally strong. They simply take turns at attempts to create a trend. Most attempts fail.
While the current setup is slightly better for the bears, until there is a breakout, there is no breakout. The bears need big bear bars, consecutive big bear bars, and consecutive closes below the January 1 low, which is the bottom of the range. If they get that, traders will look for a measured move down to the November 4 low at 1.16. Until then, traders will continue to take quick profits every few days.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market sold off sharply to below Friday’s low. Friday is a sell signal bar on the daily chart for a head and shoulders top. However, it had a bull body and Thursday was a big bull bar. This lowers the chance that today will be the start of a bear trend down to 1.16. As I said, most breakout attempts within a trading range fail.
There was a 25 pip bounce a couple hours ago. It was strong enough so that bears will consider buying a reversal up from a test of the overnight low. They hope that the remainder of the day is sideways instead of down.
The selloff was strong enough to make a trend reversal back up unlikely. Therefore, the bears will sell rallies.
Because the bounce was strong, there is a Big Down, Big Up, Big Confusion pattern. That makes a trading range most likely, at least for a couple hours. However, if there is going to be a trend from here, down is more likely than up.
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 reversed down from a wedge rally above Friday’s high. It collapsed to below Friday’s low, making today an outside down day. It reversed up strongly from a sell climax and a measured move down, based on Friday’s range. It got back above Friday’s high at the end of the day, making today an outside up day after starting out as an outside down day.
Today could not get back above the early high and it closed just above the open. It was a bull doji day, which is only slightly bullish.
Today’s high is just below the all-time high. The bulls have been continually making new highs for a couple months, and are trying again. They will probably succeed tomorrow.
It is important to note that the bull channel on the daily chart has lasted more than 50 bars, which is unusual. That increases the chance of a break below the channel coming soon.
This is the final week of January, and there is plenty of time remaining for a reversal down, especially with an FOMC meeting on Wednesday. If the bears get a selloff later this week, it would increase the chance of lower prices in February.
But the Emini is in a strong bull trend on all higher time frames. Traders have been buying every 1- to 3- day selloff for 3 months. They will continue to do this until it no longer works.
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.
