Emini and Forex Trading Update:
Tuesday May 7, 2019
I will update again at the end of the day.
Pre-Open market analysis
Yesterday opened with a huge gap down, but the Emini reversed up and formed a big bull trend day. In part, the rally was from bears who were relieved to finally have a profit. They quickly bought back their shorts early in the day. In addition, the bulls saw the open as a brief opportunity to buy at a discount.
Yesterday is a High 2 bull flag buy signal bar on the daily chart. The rally was strong enough to neutralize the oo top (consecutive outside bars) from last week. The chance of a new high this week is now the same as the chance of a 2 – 3 week pullback to below the March 21 high. That is the most recent breakout point and therefore a magnet below.
The all-time high is an important magnet above. There will probably be a break above that high within May or June, even if there is a pullback first.
Overnight Emini Globex trading
The Emini is down 18 points in the Globex session. The daily chart has been sideways for 3 weeks. It has had several violent moves up or down. This increases the chance of a breakout up or down that could last a couple weeks and travel 100 points or more.
There has been at least one swing trade up or down every day. Day traders expect that tendency to continue.
Because yesterday was a buy climax, there is a 75% chance of at least a couple hours of sideways to down trading that begins by the end of the 2nd hour today.
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 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 EURUSD daily Forex chart has been sideways for 4 days. There is a small higher low and lower high. It is a tight trading range, and there is now a triangle on the 4 hour chart. This is a Breakout Mode pattern.
The bears see a micro double top (Low 2 bear flag) just below the EMA on the daily chart. They want a continuation of their 11 month bear channel.
The bulls, however, hope that the breakout below the 5 month trading range will fail. They see Friday as a buy signal bar for a higher low major trend reversal.
While the bulls might get a 2 week rally, they need more. Unless there is a month-long rally that breaks above the March 20 major lower high, the bear trend will remain intact.
The bears simply need to prevent major higher lows and higher highs. As long as they do, traders know that the odds continue to favor lower prices over the next month or two.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart rallied above the highs of the past 2 bull days and reversed down 40 pips overnight. But, the selloff lacked consecutive big bear bars on the 5 minute chart. There is an absence of conviction. This selloff is therefore more likely simply a leg in the 4 day tight trading range than the start of a bear trend.
The bulls and bears are looking for 10 – 20 pip scalps. Traders are waiting for a catalyst that could lead to the next brief 30 – 50 pip breakout up or down. Thursday night’s China tariff announcement is the next potential catalyst.
However, there have been many catalysts this year and none resulted in a big sustained move. Day traders will continue to look to scalp reversals on most days. With today at the apex of a triangle, they expect to scalp again today.
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 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 again sold off to below last week’s low, but reversed up into the close. The selloff was a sell vacuum test of important support.
I have been saying for several weeks that the Emini would probably pull back to below the March 21 high. That is because it has been pulling back to below breakout points for several months. March 21 was the most recent breakout point.
The reversal up was strong enough to make traders wonder if the selloff has ended. The Emini fell to about a measured move down from last week’s consecutive outside bars. In addition, traders got the 2 legs down that they expected. Finally, the selloff was about the same size as the other selloffs in the 5 month rally. Consequently, traders are wondering if the bull trend will now resume.
However, there are still magnets below. While the Emini might bounce for a few days, if it does not reverse up strongly, it will probably test the gap above the March 29 high.
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 Intraday Market Update page.
