Emini and Forex Trading Update:
Wednesday May 6, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini rallied yesterday, but reversed down from around the 20 week EMA. Yesterday’s candlestick is a Low 1 sell signal bar for today. However, it was only a doji bar on the daily chart. That is not a strong sell signal bar. But, it still could be the start of a bear trend on the daily chart because traders expect a lower high after the 6 week wedge top. Then, a couple legs down for 2 – 3 weeks.
The daily chart has been sideways for a month. There have been many doji bars, like yesterday. Consequently, yesterday was not especially significant. Traders are still deciding if a selloff to 2600 has begun or if there will be one more brief leg up to above the April high first.
Even if the Emini were to break above the wedge top on the daily chart (the April high), there will should be more sellers than buyers up there. This is because the Emini is getting high in the 2 1/2 year trading range. It is overbought in a trading range. Traders believe that the 6 week rally is a bull leg in the trading range and not a resumption of the 2017 bull trend. They therefore expect reversals and not successful breakouts.
The top of the wedge is the April high. April is a High 1 buy signal bar on the monthly chart. Even though a break above the April high would trigger a monthly buy signal, it is a weak setup. This is because it follows 2 huge bear bars. Traders believe that the upside from here is small over the next month, despite the monthly buy signal.
Overnight Emini Globex trading
The Emini is up 11 points in the Globex session. Because yesterday is a sell signal bar on the daily chart, traders will want to know what is below its low. That increases the chance that today will trade below yesterday’s low. That will trigger the daily sell signal. However, because the daily chart has been in a tight range for a month and yesterday was a doji bar, there might be more buyers than sellers below yesterday’s low.
Trading ranges resist breaking out. Furthermore, on the 5 minute chart, there tends to be a lot of trading range price action. Most days over the past month have had at least one swing up and one swing down. Traders expect that again today.
Since a swing down to below 2600 should begin in May, there is an increased chance of some big bear bars this month. However, day traders will continue to bet on reversals until there is a clear, sustained trend.
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 (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 is near the bottom of the month-long trading range and the bottom of the 8 month trading range. Since most legs up and down within trading ranges reverse, traders expect a leg up to begin soon.
It is still likely that the reversal will come from above the April 24 reversal. However, trading ranges constantly disappoint traders and tend to do things that appear less likely. Therefore, traders will not be surprised if the next leg up begins from below the April 24 low. It could even begin from below the March low. The real surprise would be if a break below the March low or above the March high finally led to a trend.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market has sold off in a bear channel for 3 days. It is now near the bottom of the April trading range.
It reversed up a few hours ago to back to last week’s low. Last week was a bull bar on the weekly chart. That is a weak sell signal bar. Traders expect this week to close around its low instead of far below. Therefore, the EURUSD’s 3 day selloff will probably stall here for the remainder of the week.
A stall means a trading range on the 5 minute chart. The overnight reversal is a good candidate for the start of a trading range. The rally only went 30 pips in 3 hours. Also, the bars were small and the rally lacked consecutive big bull bars. Consequently, it looks like a bull leg in what will be a trading range.
Day traders will therefore look for reversals up and down to scalp for 10 – 20 pips. This lack of energy and this context makes a trend day unlikely today.
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 (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
The Emini sold off in a sell climax on the open. It reversed up sharply from after falling below yesterday’s low and triggering a sell signal. Big Down, Big Up creates Big Confusion. The result was a trading range for most of the day. The bears got trend resumption down at the end of the day.
Traders believe that a move down to 2600 has begun. However, the Emini has been sideways for a month. Therefore, the bulls still have a 40% chance of a brief breakout above the April high before the test of 2600.
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.
Hey Al
Could you talk more about the buy above 30 for the wedge hlmtl. I took that trade but got scared out I bought to high in a tight range in the middle of the day an stopped myself out on the next bar. Is this one of this trades where you would need a wide stop an not under 30?
Normally, something like that would be good. With so many bear bars from 17, the bear buy signal bar 29, and then the selloff on the open, today was not going to be a bull trend day.
Today had an overriding event. When there is a strong reversal up that ends in a trap, like 16, the day typically stays sideways. I usually am only looking for minor reversals.
For that particular trade, I would only scalp. because of the things I just mentioned, I would not buy with a stop for the scalp.