Emini and Forex Trading Update:
Monday January 11, 2021
I will update again at the end of the day.
Pre-Open market analysis
The Emini is breaking above the top of the December bull channel. There is a 75% chance that the breakout will reverse down within about 5 bars. But with Friday and last week closing on the highs, the buy climax might continue higher early this week as buy climax is accelerating. Remember, a buy climax can go much further than what might seem reasonable. Traders will continue to buy until there is a top or a big reversal down.
However, I have been saying that there is an increased chance of a reversal down after January 6. With the Emini trying to break above its bull channel, that further increases the chance of a reversal down starting this week. If the bears can create two or three consecutive bear days, or one huge bear day that closes on its low, traders will expect a couple legs down over the next 2 weeks. The 1st target is the November 10 low, which was the start of the bull channel.
Overnight Emini Globex trading
The Emini is down 32 points in the Globex session. Because Friday was a strong 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. There is only a 25% chance of a strong bull trend today.
Also, several factors increase the chance of a series of bear days beginning this week. The Emini is in a buy climax on the daily chart. It is breaking above the top of a bull channel on the daily and monthly charts. It is in a window when a reversal down is increasingly likely. And bull trends often end with an extremely strong rally on the 5-minute chart, like we had on Friday.
Does today have to be a big bear trend day? Not at all. In fact, a trading range is always the most likely thing every day. But because there is an increased chance of a reversal down on the daily chart starting this week, day traders should be ready for an increased chance of bear trends on the 5-minute chart this week.
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. Buyers of both 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 has 3 consecutive big bear bars closing on their lows. This is coming after a strong rally since the November 4 low, and a trading range since December 4.
I have been saying that there would be an increased chance of a reversal down for several weeks beginning in early January. If today closes on its low, there will be an increased chance of 2 or 3 legs down.
The first target is the bottom of the trading range at the December 9 low. If the bears get a couple closes below that, traders will wonder if the selloff will continue down to the November 4 low.
What could change the outlook? If today closes in the middle or top of its range, or if tomorrow is a strong bull bar, the bulls will have a chance of resuming the 3-month bull trend. But if today closes in the bottom third of its range, traders will expect a test down to at least the December 9 low. Also, they will expect at least a couple legs down, and for the selloff to last 2 to 3 weeks at a minimum.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market has been trading down for 3 days in a bear channel. While this is good for the bears, bear channels usually do not last more than 3 days. Traders should expect a transition today.
There is a 25% chance of a collapse and an acceleration down into a much stronger bear trend. More likely, the EURUSD will start to go sideways. If the bulls can stop the selling for a day or two, they will then try to reverse the selloff.
However, because of the wedge top at resistance on the weekly chart, traders will sell the 1st bounce on the daily chart. The odds currently favor lower prices.
But the bear channel on the 5-minute chart will attract buyers today or tomorrow for a 1- to 2-day bounce. Day traders know this and will look for reversals up from the low for scalps up. They will continue to look to sell rallies unless the bulls can create a very strong reversal up on the daily chart and resume the bull trend. The odds favor lower prices in the EURUSD Forex market for a few 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. Buyers of both 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
After a big gap down from yesterday’s close, the Emini reversed up from the 60 minute EMA and just above yesterday’s low. It then sold off from a wedge rally exactly at the middle of the day (bar 41) for a midday reversal. It did not break above yesterday’s high so today was an inside day.
Today had a bull body and it is a High 1 buy signal bar on the daily chart for tomorrow. But the day was a doji bar and that is a weak buy signal.
Today was also the 5th consecutive bull bar on the daily chart, which is becoming extreme. A bull streak increases the chance of a bear day tomorrow or soon.
Additionally, this is the 3rd day above the bull channel on the daily chart. A bull breakout above a buy channel typically fails by around the 5th bar. That increases the chance of s 2-week reversal down beginning this week.
But it is important to remember that trends can last a long time. As long as the bulls keep getting bull bars, traders will expect at least slightly higher prices.
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.
