Emini and Forex Trading Update:
Monday May 13, 2019
I will update again at the end of the day.
Pre-Open market analysis
The Emini had a big outside up day on Friday. This was after Thursday’s bull reversal after closing the Gap above the March 29 high. After May 1 formed a consecutive outside down sell signal, I said the the minimum goal was a 2 – 3 week pullback. Furthermore, I said it would have at least 2 legs, which is typical after a buy climax. Finally, I said it would close the gap above the March 21 high and probably close the gap above the March 29 high.
After achieving all of those minimum goals, Friday reversed up strongly for the 2nd consecutive day of testing the March 29 high. This is a credible buy signal. I have been saying that the Emini would probably make a new high after at least a 2 – 3 week pullback, but that the pullback could last a couple months.
Selloff can be bigger and deeper that traders think
The 8 day selloff has been in a tight bear channel. When that happens, the selloff is often a complex 1st leg down in a bigger 2 legged pullback. We will find out over the next 2 weeks. The bulls need to break above Friday’s high. Otherwise, the selloff will continue down in search of a bottom.
If the Emini races up to a new high, it will probably continue to above 3,000. However, if it rallies but stalls again around the all-time high, traders will sell a reversal down.
What sometimes happens in situations like this is that not many bulls take profits on the 1st leg down. But if a 2nd leg down begins or if the 1st leg keeps growing, the profit taking can create a panic. This can lead to a surprisingly big and fast move down. If this begins, the Emini will probably retrace about half of the 2019 rally.
More likely, if there is a rally and then a 2nd leg down, it will probably be mostly sideways. It might dip below last week’s low, but probably not by much. The bulls will buy it and get their new high within a couple weeks later.
Overnight Emini Globex trading
The Emini is down 54 points in the Globex session, despite 2 big bull days last week. That increases the chance of a breakout below last week’s micro double bottom and a quick move down to the next support at the March 25 low.
A big gap has only a 20% chance of leading to a strong trend from the open. An opening trading range for the 1st hour is more common. The bulls want either a double bottom or a wedge bottom, and then a swing up. The bears prefer to sell closer to the average price (the 20 bar EMA). Once there, they will look for either a double top or a wedge top and then a swing down.
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. I rarely also show limit order entries and entries on the close of bars. Buyers of the Brooks Trading Course 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 EURUSD daily Forex chart has rallied for 3 weeks after another new low in its yearlong bear channel. All prior legs up and down ended after about 3 weeks.
The momentum up is good enough for the rally to break above the May 1 high. It will probably test the April 12 high and it might test the March 20 high.
If the bulls get 2 closes above that March high, traders will assume that the bear trend has ended. The market would be back in its 5 month tight trading range, and again in Breakout Mode.
Traders want to see a strong break above the January 10 high before concluding that the chart is now resuming the 2017 bull trend. Until then, they will continue to look for reversals every few weeks.
There is no top yet in the current bull leg. Therefore traders expect at least slightly higher prices.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart has been sideways to up for 3 weeks. It has rallied 30 pips over the past hours and it just broke above last week’s high. Consequently, it triggered the 2nd buy signal in 3 weeks. It is now likely to test the May 1 and April 12 highs this week.
Although the 3 week rally is not strong, it is always easier to make money buying when the trend is up. Because the legs are not big, day traders are still scalping for 10 – 20 pips.
However, they know that the rally will probably reach the magnets above. This increases the chance of a breakout above any of the highs and a quick move up to the next target. Consequently, they are more willing to look for 50 pip swing trades.
Because the 5 minute chart is rallying, it is difficult for the bears to make money. They need to wait for the rally to transition into a trading range. If it does, the bears will look for 10 pip scalps.
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 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
After a big gap down, the Emini sold off in a Spike and Channel bear trend. As is typical, there was a bull breakout above the bear channel and then a swing up to the start of the bear channel. After a wedge rally, the day sold off and closed in its lower 3rd.
With today closing in the lower 3rd of the day’s range and breaking below Friday’s bottom attempt, the Emini will probably trade lower. There is an increased chance of a gap down below the 2800 Big Round Number tomorrow.
Today did not have a bull body on the daily chart. It is therefore a weak buy signal bar for tomorrow. Also, the 3 week bear channel has been tight. The odds are that the bears will sell any 3 – 5 day rally. The bulls will probably need a small double bottom before making a new all-time high. Consequently, a lower high and 2nd leg sideways to down is more likely that a quick resumption of the 2019 bull trend.
Despite the strong selling, the 2019 reversal up from the 10 year bull trend line was exceptionally strong. Consequently, this selloff will probably result in a higher low, even if it continues down to 2700 first.
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 Intraday Market Update page.
