Emini and Forex Trading Update:
Monday October 28, 2019
I will update again at the end of the day.
Pre-Open market analysis
On Friday, the Emini traded above the September high. Since it reversed up from below the September low early in the month, October is now an outside up bar on the monthly chart. That is bullish.
The Emini will probably make a new all-time high on the day session chart today. If it closes above the September high and the July all-time high, especially far above, the traders will expect it to go up into the end of the year.
Wednesday’s FOMC announcement can lead to a big move up or down. Because of the uncertainty, there is an increased chance that the Emini will be mostly sideways ahead of the report.
Overnight Emini Globex trading
The Emini is up 12 points in the Globex session and currently above the July all-time high. Since June, I have been saying that there would probably be a new high in September or October. With 4 days left in October, the bulls should achieve their goal this month in the day session as well. The Emini might gap to a new high on today’s open.
Because the Emini is testing an important price, there is an increased chance of a trend day. If there is a trend day, up is slightly more likely than 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 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 EURUSD daily Forex chart had 4 bear bars in the past 5 days. Since the bear channel is tight, the bulls will likely need a micro double bottom before they can get a 2nd leg up after the strong October rally.
The bears hope that the rally to the bear trend line will fail. Every rally over the past 21 months reversed down and there was then a new low. But this is perhaps the strongest minor reversal up in over a year. Consequently, many bulls will buy this pullback within a week or two. They expect at least a test of the October high and possibly the June high.
Wednesday’s FOMC announcement will create uncertainty in all financial markets. That often results in some neutrality beforehand. For the EURUSD, this 50% pullback to the EMA after last week’s rally is an example.
Overnight EURUSD Forex trading
Last week is a Low 1 bear flag sell signal bar on the EURUSD weekly Forex chart. This week opened just above last week’s low and immediately reversed up without going below last week’s low. The bulls do not want the sell signal to trigger. If it does, it will increase the chance of at least slightly lower prices this week.
The EURUSD 5 minute Forex chart has rallied relentlessly in a tight bull channel for the past 6 hours. However, the rally has only been 30 pips. Today so far is a small inside day. The rally over the past 4 hours has only been 15 pips. That is too small for day traders to trade. Most are waiting for bigger legs up and down.
Since last week’s low is still only 20 pips down, the bears will try to get there today. But with the overnight range small and with the uncertainty caused by the the upcoming FOMC announcement, today will probably remain small. Day traders will look for a few 10 pips 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 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 gapped up to a new high on the daily and weekly charts today. After a brief rally on the open, the day entered a tight trading range. The bulls are hoping for a measured move up over the next few weeks.
When there is a gap above major resistance, the Emini often goes sideways for 2 – 3 days. This is more likely because of Wednesday’s FOMC announcement.
The bears want the gap up to fail. If there is a gap down this week, there would be an island top. But with Wednesday’s FOMC news being so important, the Emini will probably not move much beforehand.
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,
As you mention after the early rally we entered a very tight trading range, my question is why do you show a buy for today once in the TTR, versus Friday where you marked it as a TTR and do not trade? Personally I’ve tried trading it today but it just kept going up barely 2 points before reversing down and it wasn’t worth it due to commission (micro-Emini) so I ended up getting out after 10 bars as breaking even.
I’m not sure which entry you are referencing on Friday. If you were in the chat room on Friday, I said that the tight trading range would probably last at least an hour or two and that they might be an attempt at trend resumption up late in the day. Since at least a couple legs sideways to down for at least an hour were likely, I was unwilling to buy anything less than perfect for at least an hour.
Today in the trading room, I repeatedly said it was a limit order day and a terrible day for stop order traders. This happens a couple times a month. If a trader is entering with stops, it is better to use a wide protective stop, scale in if necessary, and scalp. Most traders should take few if any trades since they should look for stop order entries and today was much better for limit orders.
Hi Al, if you could help me understand when it’s best to take profits. In a trending market one should look to swing so a profit 2x or greater than their risk, but doesn’t that contradict when in a high probability situation it is ok to take off at 1x actual risk. Personally I’ve been getting burned on trades that have had some open profit but I refuse to take profit only to reverse and lose. Then when I do take profit the market gives me much more. Thank you,
Please read my answer to Herman’s question above. Trading with stop entries for swing profits is a losing strategy in a tight trading range. Most traders should not trade. When the market is trending, it is easy to get out too early. It’s fine to take 1 – 2 points profit if you can keep getting back in, but very few can do that. Most traders should be only taking trades that have a reasonable chance of 4 points profit.
For a swing trade, as long as the premise remains valid, a trader should expect at least 2 legs and 10 bars in his direction, and he should try to get at least 4 points profit. His average actual risk will be about 4 points, sometimes more, sometimes less.
Whenever a trader is scalping, his risk is almost always greater than his reward, but if he does it correctly and can scale in, he can get a high enough probability to make the math work. Very few traders can do that consistently well enough to make a living. Scalpers who can scale in and use wide stops do not think about the math. They have to focus on management and make quick decisions and trust that the math is fine if they manage the trade correctly.