Emini and Forex Trading Update:
Monday January 27, 2020
I will update again at the end of the day.
Pre-Open market analysis
Friday was an outside down day after a credible minor top on the daily chart on Wednesday. Remember, 2 weeks ago, I said that t 5% correction was likely to begin within 3 weeks. It probably began last week. Friday is a sell signal bar for today.
The Emini is down almost 50 points in the Globex session and almost 3% from the high. It is now close enough to make the bears take some profits.
If today has a big gap down and then a reversal up, the correction could end today. It would be near the 1st targets of the daily EMA and the January 6 buy climax low. Many bears would take at least some profits. If enough did, the bull trend could resume.
A Surprise Bear Breakout usually has a 2nd leg down
At the moment, the selloff is a Surprise Bear Breakout. When there is a Bear Surprise, there usually is at least a small 2nd leg sideways to down. Consequently, even if the bulls get a strong reversal up today or tomorrow, there will probably be more traders looking to sell for a 2nd leg down than looking to buy for a resumption of the bull trend.
Getting near minimum targets for bears
Last week is a sell signal bar on the weekly chart. The 2 prior weeks were the biggest 2 bull bars late in a bull trend. That typically makes bulls take some profits. Today will probably gap down, which would trigger the weekly sell signal. The Emini would be about 3% down. That is getting close to my minimum target of 5% .
This is an important week. If the bears begin to get consecutive bear bars on the daily chart, especially big bear bars, traders will conclude that the profit-taking will probably reach about 5% and below 3200.
The big ranges over the past 2 days increase the chance of more big ranges this week. Furthermore, big bear days are more likely than big bull days. But because the chart is now oversold, the bears will begin to take some profits today. There will probably be at least a couple hours of sideways to up trading at some point.
Overnight Emini Globex trading
The Emini is down 49 points in the Globex session. It will probably gap down on both the daily and weekly charts. This is a surprisingly big 2 day selloff. I and many traders will look to take some profits on their shorts today.
Also, Friday was a sell climax day. That is another reason for some profit taking. There is a 75% chance of at least 2 hours of sideways to up trading today beginning by the end of the 2nd hour today. It reduces the chance of today being another relentless bear trend day.
This is the last week of January. I mentioned a couple weeks ago that the month might end near its 3246.50 open. That might be a magnet this week. That means that the Emini might trade around it this week and then close the month on Friday close to it.
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 in a trading range for 6 months. Trading ranges resist breaking out into trends. Traders believe that the 5 week selloff is a bear leg in the trading range rather than the start of a bear trend. But they want a strong buy signal bar before taking profits on shorts and looking to buy.
The EURUSD is now is the support zone that I have discussed for a few weeks. I said that reversals in trading ranges usually come from beyond support and resistance. That is why I said that the selloff would probably fall below the December 20 low. Even if it falls below the November 29 low or the October low, traders will look to buy a reversal up. They will bet that a reversal is more likely than a successful breakout.
If today is a strong bull day, it would be a buy signal bar for tomorrow. Many bears would take profits and the bulls would begin to buy. They would see a higher low above the November low and consecutive small parabolic wedge bottoms.
The minimum target would be the to of the most recent small wedge channel, which is the high from 5 days ago. The next target would be the January 16 lower high. That is around a 50% retracement.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market fell below last week’s low overnight, but reversed up. There is still room to the 1.10 Big Round Number and many bulls would like to see the selloff get there and then reverse up. Consequently, that magnet below reduces the chance of a big bull day today. However, because there will probably be a 100 – 200 pip rally beginning within a week, traders are ready for a bull trend day soon.
they might need 2 – 3 sideways days and 2 – 3 bull bodies before they buy aggressively.
Because the EURUSD is in the buy zone on the daily chart and the current bear leg has lasted longer than most, the bears will look to take profits soon. This reduces the chance of a big bear day early this week.
The overnight range has been small. Day traders have been scalping. However, there is an increased chance of one or more bull days 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 opened with a huge gap down. That created a windfall profits for the bears. Also, the selloff was just a little more than the psychological 100 points down from the high. Finally, it was a test of the open of the month. Many bought back their shorts. The Emini entered a trading range for a couple hours. There was a brief 2nd leg up to another trading range, but the Emini drifted back down for the 2nd half of the day.
Today was a bull trending trading range day, but it was mostly sideways. The bulls see today as a buy signal bar for tomorrow. Since it had a small body, it is a weak buy setup.
It is important to understand that a short covering rally often lasts a couple days. The odds still favor a 2nd leg down to below the January 6 low of 3213.25 and the 3200 Big Round Number. That would also be a test of the 5% pullback level, which is 3171.
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
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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.
