Emini and Forex Trading Update:
Monday December 7, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini weekly and monthly charts are in bull trends, and the bulls want the year to close near its high. Additionally, there are 5 consecutive bull bars on the daily chart, and last week closed at a new all-time high. That makes at least slightly higher prices likely this week. But 5 consecutive bull bars is fairly unusual and it therefore increases the chance of a bear bar today or tomorrow.
One problem that the bulls have is that the High 1 buy signal from 3 weeks ago on the weekly chart had 2 bear bars. That is a weak buy setup. Normally, a rally from a weak bull flag only lasts about a couple bars. Last week was the 2nd bar. That increases the chance that this week will be sideways to down.
As I mentioned over the weekend, there will probably be a reversal down at least to the midpoint of the 4-month trading range beginning at some point in December, and it can come at any time. The rally over the past 2 weeks is a micro wedge on the daily chart. That increases the chance of a reversal down starting this week.
Most day’s have had reversals for over a month
Most days for the past 6 weeks have closed either around the middle or near the open. That means that they have had swings up and down on the 5-minute chart. Day traders will expect that again today. But if there is a series of strong trend bars today in either direction, they will look for a trend day.
Also, the rally from late October only had one pair of big bull bars closing near their highs. With Friday closing near its high, this reduces the chance that today will be a 2nd consecutive big bull day closing near its high. If today is near the high after 11 a.m. PST, day traders will look for at least a minor late selloff.
Overnight Emini Globex trading
The Emini is down 9 points in the Globex session. Today will therefore open around Friday’s 5-hour trading range. Because traders thought that this was an area where the price was fair on Friday, there is an increased chance that today will go sideways in that range on today’s open. Day traders will then look for a double bottom or wedge bottom for a swing up, or for a double top or wedge rally for a swing down.
But, consecutive big bull trend days have been rare for 2 months. That reduces the chance that today will be a strong bull trend day.
Can today begin a December selloff? A selloff can come at any time. However, it usually does not begin after 5 consecutive bull days. Therefore, traders will expect the Emini to go sideways for at least a couple days, before there is a swing down on the daily chart.
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. 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 formed a micro double top on Thursday and Friday, at a measured move projection up from a double bottom. There were 10 bars without a pullback, which means the rally was a 10-bar bull micro channel. That is extreme and therefore a buy climax at resistance, which typically attracts some profit-taking.
Friday was a bear bar closing near its low. Traders see it as a sell signal bar for a buy climax at resistance.
However, after 10 days where the bulls were happy to buy above the low of the prior day, they finally got an opportunity to buy below the low of the prior day. Many bulls who missed the rally will be eager to buy this 1st pullback.
The pullback can last a few days, but traders expect a test back up to last week’s high at a minimum. However, extreme moves typically lead to trading ranges. While traders expect higher prices a month from now, the EURUSD might begin to go sideways over the next week or two.
Can the rally fail?
Can the breakout fail and and become a bull trap? A reversal is always possible, but it becomes less likely when a breakout has several consecutive bull bars closing near their highs and far above resistance, like this one. Consequently, even if the bears get a sharp reversal down to below the September 1 high at the top of the 4-month trading range, the selloff will probably just be a breakout test.
The best the bears can probably get over the next couple weeks is a minor reversal, which means a bear leg in a trading range. The bottom of the range should be around the September 1 high.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market sold off to below Friday’s low overnight, but reversed up to above Friday’s low. The bulls want today to close near its high. Today would then be a strong buy signal bar for the 1st pullback in 10 days. This would be a good High 1 bull flag buy setup, and it would increase the chance of at least slightly higher prices for tomorrow.
If today closes near its low, which is unlikely, traders will expect lower prices tomorrow. That would increase the chance of a 2 to 3-day pullback.
Finally, what happens if today closes in the middle and around yesterday’s low? Traders would expect another sideways day tomorrow.
Today’s open might be magnet for remainder of the session
Day traders will fight today over how today will close. After the 60-pip rally up from below yesterday’s low, today will probably not be a bear trend day. Traders will buy pullbacks.
But today is already back to the middle of Friday’s range, and above the open of the day. The bulls do not need more than this to create a reasonable buy setup for tomorrow. That reduces the chance that the rally will continue much higher. The bulls will probably look to buy 20 to 30-pip pullbacks for the remainder of the day.
The bears had their chance but could not sustain the selling. However, they suspect that today will evolve into a trading range. Therefore, once the reversal up stalls, bear day traders will look to sell reversals down 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 from yesterday. I show each buy entry with a green rectangle and each sell entry with a red rectangle. 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 in a Trending Trading Range Day today. The lower range was a test of the 60 minute EMA.
On the daily chart, today was a bear inside bar. It is therefore a sell signal bar for tomorrow. There is a small wedge rally over the past 2 weeks on the daily chart, and it is nested within a 2-month wedge top. But because today is only a doji, it is a low probability sell signal bar.
I have been saying that the Emini should reverse down to around 3200 to 3400 in December or January. However, saying that any of the many reversals down is the start of a bear trend is a low probability bet unless the pattern is strong. This is a weak sell setup in a 2-week Small Pullback Bull Trend. The past 5 days had bull bodies. There are probably buyers not far below today’s low.
But, there is probably not much left to this leg in the bull trend on the daily chart. If there bears get a better top or a strong reversal down, traders will expect at least a couple small legs down to below 3400.
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.
