Emini and Forex Trading Update:
Wednesday February 26, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini crashed on the 5 minute chart yesterday. Consecutive big selloffs like those of Monday and Tuesday typically attract profit takers and bargain hunters. This increases the chance of a bull trend today or tomorrow. Can today crash again? While possible, a 3rd huge bear day would be very unusual.
I have been saying that February might get down to the January low and create a micro double top on the monthly chart. Yesterday fell far below the January low. Perhaps too far. There are 3 trading days left to the month. Traders have to wonder if there will be buying into the end of the month. Will February get back to near the open of the month and create a doji bar on the monthly chart instead of a big bear bar? The bulls have a 30% chance of this.
A short covering rally in a strong bear breakout typically lasts a day and a half to 3 days. That might begin today.
The selloff was surprisingly strong. Traders should expect a 2nd leg down after a bounce. The selloff might reach 3000 at the top of the 2 year trading range before the bulls will try again to make another new high. That would also be a 10% correction.
Overnight Emini Globex trading
The Emini is up 15 points in the Globex session. It sold off again last night. After falling below the 3100 Big Round Number, it reversed up. On the 60 minute and 4 hour Globex charts, there is now a parabolic wedge sell climax.
Since a 3rd huge bear day would be very unusual, today and the rest of the week (and therefore month) will probably be either sideways or up. The bulls might need to stop the selling for a day before they can create a rally. Traders expect a strong short covering rally for 1 and a half to 3 days to begin this week. It might test the January low, which would retrace about half of the selloff.
Because the daily range was big yesterday, the bars and legs up and down will probably be big again today. That means stops will be far and traders have to trade small size. Micro Emini is an alternative. Furthermore, scalpers will initially look for 5 – 10 point scalps and not 1 – 2 point scalps.
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.
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 daily chart of the EURUSD Forex market has rallied for 5 days after almost closing the gap from 2017. The rally had 3 small bull bars and it is stalling at the EMA and the October low resistance.
But 5 days without a pullback is a 5 day micro channel. The bears typically need at least a micro double top before they can resume the bear trend. Therefore, the EURUSD will probably go sideways for at least a couple more days before the bears will be able to close that gap.
Traders expect a 2 – 3 week short covering rally after a climactic reversal down to major support. This rally so far is disappointing.
With the bear flag and the rally both being weak, there is confusion. That is a hallmark of a trading range. Consequently, the EURUSD will probably be mostly sideways for at least a couple more days.
At that point, traders will have more information. They are deciding if the 150 – 200 pip short covering rally has begun.
The alternative is that this rally will be a bear flag. If so, a bear flag late in a bear trend is usually the Final Bear Flag before there is a bigger reversal up. In either case, traders expect at least a few weeks of sideways up trading now or soon.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market broke above the October low yesterday and above the 20 day EMA today. I have been saying that both were likely targets.
However, the EURUSD reversed down from this resistance over the past couple hours. The bears will try to get today to close on its low and below the October low. If they are successful, today would be a reasonable sell signal bar on the daily chart.
But as I wrote above, the context is bad. The EURUSD will probably be sideways for the rest of the week. This is true whether the bears create a sell signal bar today or if the bulls get a 4th consecutive bull bar on the daily chart.
Because 3 consecutive bull bars in a weak rally is excessive, the bears will probably be able to create a bear bar today. That means day traders should find it easier to make money selling rallies than buying selloffs.
But since the EURUSD is exhausted, the 4 day rally will probably evolve into a trading range for a few days. Therefore day traders expect reversals and small moves up and down, even if today closes below the October low and around the low of the day.
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.
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 2 huge bear days, today was likely to be sideways to up. It was a bear trending trading range day. There will probably be some short covering tomorrow or Friday. Traders expect a bounce for at least a couple days.
The Emini spent the final 2 hours today just above the 3100 Big Round Number. That tells traders that it is important. Many traders will not buy until either there is a reversal up from below 3100 or a strong rally from just above. It might come on Thursday or Friday.
Today closed on its low and just above 3100. It therefore will probably trade below 3100 tomorrow. It might even gap below. If so, traders will look for an early low of the day or for a Bear Trend From The Open.
February is an outside down month. After breaking above January’s high, it reversed down to below January’s low. But it might get back to the January low by Friday’s close. That is also near the open of the month. February would then be a doji candlestick on the monthly chart. Less likely, the Emini will sell off through the end of the week and the Emini will close on the low of the month.
No matter what it does this week, the 1st rally will probably be minor. That means that the Emini will probably be below this week’s low within the next few weeks.
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.
