Emini and Forex Trading Update:
Monday December 23, 2019
I will update again at the end of the day.
Pre-Open market analysis
The Emini is in the final 7 trading days of the decade and the decade has been very strong. On the yearly chart (not shown) where each bar is one year, you would see that the decade opened near the low and it is now closing near its high. Also, this year would be a big bull bar. This 11 year rally is an unusual event and you will probably never see something as strong as this again on the yearly chart in your trading career.
The bulls are trying to show that they are still strong. They want the year and the decade to close near their highs. Since they have been in control for 10 years (actually, 11), they will probably achieve their goal. The Emini will probably be sideways to up through December.
There is always a chance of profit-taking. The Emini often tries to either duplicate or do the opposite of what it most recently did on any time frame. There was a crash last Christmas that reversed up sharply. This year, the Emini is crashing up. There is therefore a small, but real, chance of a big selloff soon after Christmas, which would be the opposite of last year. But the downside risk is currently small. Traders will buy the next 1 – 3 day pullback.
Christmas week is traditionally the quietest week of the year. There are usually more and longer tight trading ranges on the 5 minute chart than at other times. Furthermore, the ranges can be very tight. While there will be some swings, most of the week will probably be quiet.
Overnight Emini Globex trading
The Emini is up 6 points on the Globex chart. It might gap up today. If so, it would form another gap up on the weekly chart, like it did last week.
The bull trend on the daily and weekly charts has been strong. Most days over the past few weeks closed above the open. However, most had a lot of trading range price action. Consequently, day traders expect a bullish bias, but mostly quiet trading.
Since the trend is strong on the daily chart and today will probably gap up, there is a slightly increased chance of a big trend day. If there is a trend, up is more likely. However, Christmas week is typically the quietest of the year. If the early bars are small and if there is a trading range open, a trading range will be likely today.
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. 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 turned down from a double top at the bar trend line 2 weeks ago. Last week is a sell signal bar on the weekly chart (not shown). However, this week is still above last week’s low and therefore the sell signal did not yet trigger.
Friday was the 3rd big bear day in the past 6 days on the daily chart. The prior 2 instances had bad follow-through. So far, today is bad follow-through again for the bears.
This type of price action more often happens in trading ranges than in bear trends. Traders therefore at the moment do no believe the selloff is particularly bearish. It looks like all of the other selloffs over the past 2 years. Traders expect it to last for a few weeks and then reverse back up.
The bulls want a double bottom. The 3 possibilities for the 1st leg of the double bottom are the December 6 low, the November 29 low, and the October 1 bottom of the 2 year bear channel.
They do not know where there reversal up will begin, but they are confident that it will come. The bulls want to see a good bull trend reversal bar near one of those 3 lows. If they get it, especially if there is also a micro double bottom, they will look for a 2 – 3 week rally.
At some point, there will be a successful break of the 2 year bear channel. A bull breakout is always more likely. But a bear channel typically converts into a big trading range instead of into a strong bull trend. Consequently, traders should expect a trading range over the next year. The top of the range might be at the September 2018 start of the bear channel, which was around 1.18.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market has been in a 20 pip range over night. Christmas week often has a lot of small, sideways days.
However, last week is a sell signal bar on the weekly chart. Today’s low is currently only 3 pips above last week’s low. Day traders should expect today or tomorrow to fall below last week’s low and trigger the sell signal. But because the daily chart is in the middle of a 5 month trading range, they also expect that there probably will be buyers not far below the sell signal bar.
Today is unlikely to have a big trend bar up or down. Day traders are looking for small scalps on reversals up or down. If there is a strong breakout in either direction, they will swing trade. However, they know that it probably not come this week.
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
The Emini gapped up to another all-time high, but it immediately pulled back and entered a small trading range. This is typical Christmas week trading. There were few reasonable stop entry setups. The range was small enough to make it difficult for even the limit orders traders to make much money. Today had the smallest range in 2 years.
Most days this week and next will probably be similar, even though there is a bullish bias. However, there is usually at least one trend day during the Christmas/New Year’s break. Because both are on Wednesday, the slow trading will probably be for a full 2 weeks this season. There is an early close tomorrow and it will probably be very quiet. I therefore will not trade tomorrow.
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.
