Emini and Forex Trading Update:
Wednesday January 29, 2020
I will update again at the end of the day.
Pre-Open market analysis
As I said was likely, yesterday rallied. The Emini was briefly oversold and many bears bought back their shorts. Yesterday is a buy signal bar for today.
However, the odds still favor a 2nd leg sideways to down to below 3200 within a couple weeks. Since 3300 was an important resistance level and then support level in January, this bounce is testing it. The odds still favor a 2nd leg sideways to down unless there is a strong break to a new high.
The month ends on Friday. I have been saying that the open of the month might be a magnet in the final hour on Friday, and that the Emini might oscillate around it until then. This is still the case. The bulls obviously want a 5th consecutive big bull bar on the monthly chart. But the bears want January to close on its low and become a strong sell signal bar. More likely, the Emini will close the month somewhere in the middle.
FOMC announcement today
There is an FOMC announcement today at 11 am PST. The Fed has led traders to believe that there would be no change in policy today. A surprise is unlikely. However, day traders should still be flat ahead of the report.
Also, they should wait for at least 10 minutes after the report before resuming trading. This is because there is usually a big move up and down within the 1st few minutes after the announcement. It usually takes at least 10 minutes before a trend will begin.
Even if the bulls get a rally up to the January high, the Emini will probably be sideways to down for at least a couple weeks. The upside is therefore limited.
But because the bull trend is so strong on the weekly and monthly chart, the downside is probably limited as well. With limited up and down, traders should expect that the 4 month buy climax will evolve into a trading range for at least a couple weeks.
Overnight Emini Globex trading
The Emini is up 7 points in the Globex session. It might gap above yesterday’s high. That would create a 2 day island bottom with Monday’s gap down. However, island tops and bottoms are minor reversal patterns. A gap up today is therefore not a major buy signal today.
I have been saying that the Emini might have to test 3300 before the bears can get a 2nd leg down. This rally is that test.
The Emini will probably not break strongly above or reverse strongly down ahead of today’s FOMC report. Also, while yesterday was a big bull day, it was mostly sideways for the final 4 hours. Day traders are expecting a lot of trading range trading ahead of the report because the rally is at resistance. This reduces the chance of a big trend up or down before the 11 am PST announcement.
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.
EURUSD Forex market trading strategies
The daily chart of the EURUSD Forex market has been selling off in a tight bear channel for all of January. It is now testing the November low and the 1.10 Big Round Number.
January traded above the December high and below the December low. It is therefore an outside down candlestick on the monthly chart.
While bearish, it is less so since the monthly chart has been in a tight trading range for 6 months. There is often an inside month after an outside month. Also, tight trading ranges typically have buyers below. Consequently, despite the unusually strong selloff, there is still a 50% chance that it will end around the November low and not continue to below the October low.
While the past 8 bars are forming a parabolic wedge sell climax, there is no bottom yet. Because the channel is tight has mostly bear bars, the bulls will probably need at least a micro double bottom before they can get a 2 week, 200 pip bounce.
There is an FOMC announcement today at 11 am. Because it typically results in a quick move up and down within the 1st few minutes, day traders should exit positions ahead of the report. They should wait at least 10 minutes after the report before resuming trading.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market traded above yesterday’s high overnight and it just went below yesterday’s low. Today is therefore an outside down day. However, it is at the support of the bottom of a 4 month trading range. Also, it only fell 4 pips below yesterday’s low. Finally, it has been in a 15 pip range for 6 hours. Day traders are currently looking for scalps.
Because the EURUSD is at major support, there is an increased chance of a strong bear breakout and of a reversal up. Today’s FOMC report is a potential catalyst for a strong move up or down. But as long as the range and bars are small, day traders will continue to look for scalps.
Friday is the end of the month. Since January is now an outside down month, the December low will be important for rest of the week. The EURUSD might get stuck in a tight range around that low for the rest of the week.
The bears want Friday to close far below the December low. That would increase the chance of lower prices in February. The bulls want January to close far above the December low. Traders would then look for a leg up from the bottom of the 4 month range over the next 2 weeks.
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.
End of day summary
After a sell climax on the open, the Emini rallied to a new high after the FOMC announcement. The breakout failed, but so did the reversal down to near the low. The Emini closed near its low. It is a sell signal bar for tomorrow on the daily chart.
Did today’s 3292.75 high adequately test 3300? It might have, but most bulls expect the Emini to get closer. The odds still favor a 2nd leg down to below 3200 over the next few weeks. But that 2nd leg down might not come without a test of 3300 first.
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.
