Emini and Forex Trading Update:
Thursday January 30, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini rallied for a 2nd day yesterday. The high got to within 7 points of the 3300 Big Round Number. I talked about how that was an important price in mid-January and therefore a magnet. I also said that the 1st reversal up might last only 2 days.
Yesterday is a Low 1 sell signal bar for the bears who are hoping that a bear trend began last week. It is a sell setup, but many traders expect a better test of 3300 before the 2nd leg down begins.
The 2 day reversal up was big enough to create confusion. Since the chart is not clear, the Emini might have to go sideways for a week or more before the 2nd leg down begins. The odds are that this selloff will fall to below 3200 within a few weeks. A 5% correction down to 3177 is a reasonable minimum target.
I mentioned several times recently that January might close around its open when the month ends on Friday. That is still a reasonable possibility. There will probably be a big gap down today to around the open of the month.
Overnight Emini Globex trading
The Emini is down 18 points in the Globex session. There will therefore be a big gap down.
When there is a big gap down, the Emini is far below the EMA. Traders do not like to sell far below the average price. That reduces the likelihood of a big selloff on the open after a gap down. They prefer to sell near the average price.
The result is that the Emini often goes sideways for an hour or two until it gets closer to the EMA. That trading range usually has both a buy and a sell setup.
The chart is then in breakout mode. The bulls look for a double bottom or wedge bottom and then a swing up. However, the bears want a double top or wedge top near the EMA and then a swing down.
If there is a trading range open, it is a sign of a balanced market. It reduces the chance of a relentless trend up or down. If there is a swing up or down after the initial trading range, it typically leads to a 2 – 4 hour swing. Then, traders look for either a trading range or an opposite swing.
The Emini is back to around the open of the month. I have been saying that the open would be a magnet this week and that the Emini might end the month around the open. Today’s gap down makes that likely. Traders should expect it to be a magnet for today and tomorrow. That reduces the chance of a big move out of this area before tomorrow’s close.
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 is just above the bottom of a 4 month trading range. This is the buy zone. But even if the selloff continues down to the October low, traders will still look for a 2 – 3 week, 200 pip rally. That is because every strong leg up and down for the past 20 months reversed within a few weeks. There is no reason to assume that this 5 week selloff will be different.
Also, after a break below the neckline of a head and shoulders top, there is usually a rally back to the breakout point. That is a breakout test. Traders want to see if the bears will sell again at that price. Will the breakout continue down for one or more legs, or will it fail? There are often 2 – 3 possible prices for the neckline. Traders expect a bounce up to the December 6 low or even the January 10 low within a week or two.
On the monthly chart, January is an outside down month. The month closes tomorrow. The bears want January to close far below the December low. That is unlikely because the monthly chart has been in a tight trading range for 6 months. Tight ranges resist breaking out. Consequently, January will probably close around or above the December low.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market rallied slightly overnight. It just broke above yesterday’s high. Yesterday was an outside down day on the daily chart. Today is therefore breaking above the neckline of a 2 day micro double bottom.
The daily chart is oversold and the December low is a magnet above on the monthly chart. Traders should expect sideways to up trading through tomorrow’s close when January ends.
That does not mean a strong bull trend. All the bulls need is slightly higher prices. Traders so far are not looking for a big trend up. But they will buy any 20 – 30 pip selloff through tomorrow’s close, knowing that January will likely close near or above the 1.1040 December low.
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 had several big swings up and down today. It reversed up twice from the open of the month. Late in the day, it strongly broke above a 5 hour triangle and closed on its high. It is now a buy signal bar for tomorrow.
The reversal up was strong enough to give the bulls a 50% chance of a rally back up to a new high without a 5% correction. There is a 50% chance of a reversal down from a double top around 3300 or the all-time high and then a 5% correction.
As I have been saying for the past week, the open of the month would be important at the end of this week. The monthly candlestick closes tomorrow. The bears want a close below the open. January would then be a sell signal bar for February. Today’s reversal up from the open of the month was strong enough so that January will probably close in the middle or top of its range.
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.
Hi Al,
thank you for all your hard work you are doing.
When I look at the chart after close its pretty obvious when to buy and sell.
But what is not so obvious are trades which fails.
I think traders would gain more by acknowledging losers as we naturally avoid seeing them.
Al does show failed trades all the time; for example the sale at around 12:15 is a failure.