Emini and Forex Trading Update:
Friday December 20, 2019
I will update again at the end of the day.
Pre-Open market analysis
The Emini broke above its 3 day tight trading range yesterday. Yesterday was a Small Pullback Bull Trend. That is a type of buy climax. That increases the chance of some trading range price action today. But, with the bulls trying to get the year to close on the high, there is not much downside risk through the end of December. Also, there is no sign of a top. Traders expect more sideways to up trading.
Overnight Emini Globex trading
The Emini is up 1 point in the Globex session. Since yesterday was a strong bull trend, the bulls will begin to take some profits at some point today. That increases the chance of more sideways trading today.
However, the bull trend has been strong for 3 months. The bulls have been in control and they would like to continue that control through yearend. Therefore, the odds are that any surprise will be up rather than down.
There is always a chance of a panic profit-taking from a crowded trade. If everyone believes that the Emini will go up, but it stalls, some bulls might take some profits before the end of the year. If enough do, it could trigger panic selling. This could lead to 2 – 3 bear trend days. However, it is more likely that the Emini will continue sideways to up for the remaining 8 trading days of the decade.
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.
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 daily chart of the EURUSD Forex market turned down from a double top at the bear trend line last week. While there have not been consecutive big bear bars, the selling has been strong enough to make lower prices likely.
The targets are the prior lows. The bulls want a double bottom with either the December 6 or November 29 low. But even if the selloff continues down to a new 2 year low below the October low, the bulls will buy a reversal up. That has been a profitable strategy for 2 years.
So we know bulls will buy the selloff, but we don’t know when or where. Where will the bears sell? They have been selling above prior highs. That is trading range price action. Traders look for reversals at prior highs and lows.
This has been going on for the 15 months of the bear channel. The channel has been so flat that traders have been trading it like a trading range that it sloped slightly downward. They will continue to look for reversals every 2 – 3 weeks until there is a clear, strong breakout into a trend.
Since most bear channels eventually have a bull breakout, if there is a transition into a strong trend, it will probably be up. However, a bear channel is more likely to have a weak bull breakout and evolve into a trading range.
That is what traders should expect over the next year. While the price action will be similar to what it has been, the pattern will be a trading range instead of a weak bear channel. Traders will continue to look for reversals every 2 – 3 weeks for all of 2020.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market sold off overnight. Even though the selloff was only 35 pips, it is enough to make traders believe that the 6 day selloff on the daily chart will continue down to some higher low. The 1st target is the December 6 higher low at 1.1040.
The bears want a continuation of the overnight selloff and a big bear trend day. But look at the selling over the past 6 days. It has not been relentless. Consequently, today will probably not fall much further.
The EURUSD has been sideways for 2 hours. That means that the bulls will begin to buy reversals up for scalps. It also means that the bears are switching to selling rallies. Instead of selling breakouts to a new low, they now are taking profits at the low.
The 5 minute chart is still in a bear trend and it might continue down all day. But the small bars and the 2 hour trading range make a transition into a trading range more likely.
Can the bulls get a reversal up? The small bars indicate a lack of energy. Traders think that the price is just about right. That reduces the chance of a big move up or down for the rest of the day.
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 began with a trading range open. It had a brief bull breakout and entered another trading range. This was therefore a Trending Trading Range day. The bulls were unable to get sustained trend resumption up at the end of the day.
Next week is Christmas week. It is usually the quietest week of the year. There are usually more tight trading ranges than usual. Furthermore, they tend to be tighter and last longer that at other times. While there will be some swings, day traders should expect mostly trading range price action.
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.
