Emini and Forex Trading Update:
Friday September 4, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini crashed on the 5 minute chart yesterday to below the open of the week. It began a reversal up from a 5 hour wedge bottom on the 5 minute chart in the final hour. That increases the chance of a continuation up early today. The open of the week is an obvious magnet.
If today closes below the open of the week, this week will be a bear reversal bar on the weekly chart. That would be a sell signal bar for a buy climax top. Traders would expect at least slightly lower prices next week.
As you know, I have been saying that the 2 streaks of 9 and 7 consecutive bull bars make a 10 – 20% selloff likely to begin in September. It might have started yesterday. But the bears need follow-through selling today and over the next few days.
If today instead closes on its high, it will undo yesterday’s bearishness. Traders will then wonder if there will be one more new high before the selloff begins.
Overnight Emini Globex trading
The Emini is up 5 points in the Globex session. Yesterday was a sell climax day on the 5 minute chart. The day after a sell climax has a 75% chance of at least a couple hours of sideways to up trading that begins by at least the 2nd hour.
The Emini reversed up from a wedge bottom at the end of the day yesterday. Traders expect a 2nd leg up to at least the start of the wedge, which was the 9 am PST lower high.
That is near the 3500 Big Round Number and the open of the week. Both are magnets above. Remember the bulls do not want a bear body on the weekly chart. They will try to get the week to close above Monday’s open. The closer the week closes to the low, the stronger the sell signal bar on the weekly chart will be.
The most likely outcome for today is a test of the open of the week and a trading range. There will probably be at least one swing up and one swing down.
Traders will then wait until next week to decide if yesterday was just a brief bear trap in a bull trend or the start of a 10 – 20% swing down. The bear case is currently more likely. But 1 or 2 big bull days will show that the bulls are still in control.
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. I do not want the lines to be distracting. If they are longer, I make them dotted. But, they have to be visible, so I make the shorter ones solid. 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 (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 is in the middle of a trading range, oscillating around the resistance of the September 2018 high. There are higher lows and highs and the trading range is also a weak bull channel.
Yesterday was another higher low. The bulls want 2 closes above the top of the range to confirm a bull breakout. They then want a measured move up to the February 2018 high at around 1.25.
After reversing down from the wedge 2 days ago, the bears expect at least a small 2nd leg sideways to down. They therefore think that there will be sellers above yesterday’s high. However, they want the lower high to lead to a strong 2nd leg down. They want it to break below the August trading range and then test the breakout point of the June 10 high. The daily chart is currently still on the wedge top sell signal from 2 days ago.
The bear case is slightly more likely, but until there is a breakout, there is no breakout. Traders will continue to look for reversals every few days.
Overnight EURUSD Forex trading
The EURUSD Forex market went above yesterday’s high to trigger a higher low buy signal on the daily chart. But, the breakout was only 1 pip and it then sold off 40 pips over the past 4 hours. This is because traders expected a lower high and a 2nd leg down on the daily chart.
Most of the overnight trading has been sideways. This is what typically happens in the middle of a trading range. Day traders expect reversals and scalp for 10 – 20 pips up or down. If the chart begins to have a series of strong trend bars in either direction, they will switch to swing trading.
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. I do not want the lines to be distracting. If they are longer, I make them dotted. But, they have to be visible, so I make the shorter ones solid. 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 (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 had strong follow-through selling in the 1st hour. It reached the 1st target on the daily chart, which is the bottom of the streak of 7 consecutive bull bars. It also traded below last week’s low, making this week an outside down week. Additionally, it closed the gap on the weekly chart below last week’s low.
However, it then reversed up for the rest of the day. It is now a High 1 buy signal bar on the daily chart. But with a big bear body, this is a weak buy setup. There will probably be sellers not too far above.
The selloff was strong enough for traders to expect a 2nd leg down. However, if today’s bounce continues next week and is big, traders will conclude that the selloff is over and that the bull trend is resuming.
At the moment, traders expect a lower high and a 2nd leg down. It might reach the bottom of the streak of 9 consecutive bull bars, which is around 3200.
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.
Hi Al,
Would like to know why would you put 1tick above bar 29 as a swing buy, obviously it has a several strong bull bars beforehand and it could lead to a measuring gap with bar 18 h and it’s after a strong sell climax, but it also could lead to 20 bar gap ema sell and a broader bear channel and it’s near h of bar 12, so wonder what’s your thought on bar 29 swing setup
As always, appreciate your teaching, thanks