Emini micro double bottom at September 16 high

Emini and Forex Trading Update:
Thursday October 22, 2020

I will update again at the end of the day.

Pre-Open market analysis

The Emini has been sideways for 5 days. Traders are deciding if the selloff has gone far enough or it the cash index has to fall a little more to its February high before the buyers will return. Less likely, the Emini has begun a bear trend from a double top.

If there was a reversal up from below Tuesday’s low, there would be a micro wedge bottom on the daily chart. Also, the cash index might be down at its February high. That would attract buyers.

A market has inertia. It tends to continue what it has been doing. Therefore, traders today will expect a lot of trading range price action on the 5-minute chart. That means at least one leg up and one leg down.

The Emini is in Breakout Mode on the daily chart. While traders expect this selloff to end within a few days and for the rally of 2 weeks ago to resume, they know that there could instead be a bear breakout below the micro wedge bull flag. They therefore will be willing to swing trade up or down if there is a strong breakout with follow-through. Remember, the cash index might have to fall another 50 points to test its February high. If it does, the Emini will also fall about 50 points.

Overnight Emini Globex trading

The Emini overnight sold off to below Tuesday’s low. If it reverses up from here, there would be a micro wedge on the Globex chart.

The bulls would have a stronger buy setup if the day session dips below Tuesday’s low and then reverses up. That would create a micro wedge on the day session chart as well.

The past 2 days were doji bars on the daily chart. A doji is neutral. It means that the Emini went up and down, but closed where it started.

With traders wondering if there will be a stimulus package before the election and with the uncertainty about tonight’s US presidential debate, there are fundamental reasons why the Emini might have a lot of trading range trading again today. Coming into the day, day traders expect trading range price action. But if there is a strong, sustained move up or down, they will change to trend trading.

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. I do not want the lines to be distracting. If they are longer, I make them dotted. But, they have to be visible, so I make the shorter ones solid. 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 is stalling at the September 21 sell climax high, as I said was likely.

Trading ranges often have legs up and down that subdivide into 2 legs. This happened with the Selloff from the September 1 high to the September 25 low. It might now be happening with the rally up from the September 25 low. If the EURUSD reverses down from here, the reversal would be a Low 2 sell signal in a bear channel that began on September 1.

However, trading ranges resist breaking into trends. Traders expect reversals. Therefore, if today is a sell signal bar on the daily chart, the reversal down will probably just be a bear leg in the trading range instead of a resumption of the bear trend.

This is especially true after 3 strong bull days. Also, the September 10 lower high is a major lower high and it is not far above. When a magnet is nearby, a market usually tests it. That further reduces the chance that today will be the start of the resumption of the bear trend. More likely, today will lead to a 1 – 3-day pullback, and then the bulls will again try to break above the September 10 lower high.

Overnight EURUSD Forex trading

The 5-minute chart of the EURUSD Forex market reversed down from a double top overnight. A double top is a trading range. The breakout below the neck line is now near a measured move down.

Also, the day’s range is almost as big as the average range for the past several days. Consequently, there may not be much left to the selloff. If the selling stops, the EURUSD will probably transition into another trading range. Today would be a trending trading range day. This is what is most likely.

For the past several hours, day traders have only been selling. But since a lower trading range will probably begin to form, they will begin to buy reversals up. Unless there is a surprisingly strong reversal up, they will also sell rallies.

That is what happens in trading ranges. Traders buy low, sell high, and take quick profits. Less likely, the bear trend will continue much lower or it will reverse back up into a bull trend.

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. I do not want the lines to be distracting. If they are longer, I make them dotted. But, they have to be visible, so I make the shorter ones solid. 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

The Emini sold off on the open to below Monday’s low, but reversed up from a parabolic wedge bottom. There was also a Cup and Handle bottom and a Head and Shoulders bottom.

Today closed near its high. It is a buy signal bar for tomorrow. There is now a micro wedge bull flag on the daily chart, which I said was likely. Traders expect higher prices tomorrow.

What happens if there is a surprise in tonight’s debate or with the stimulus package? While unlikely, either could result in a collapse below the wedge bottom. But at the moment, traders expect at least slightly higher prices tomorrow.

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.

---