Emini and Forex Trading Update:
Friday October 30, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini reversed up yesterday from below Wednesday’s low to above its high. Yesterday was therefore an outside up day near the bottom of its 3-month range. It is a minor buy signal bar for today. But because it had a big tail on top, it is a weak buy setup. This makes sideways more likely than a big bull day.
Even if the bulls get a rally today, it would be coming after a strong 4-day selloff. The bears will probably sell a 1 to 2-day bounce.
Final trading day of the month
This week has been all about the monthly chart. Today is the last trading day of the month. October is an inside bar on the monthly chart, and it followed an outside bar in September. There is now an ioi Breakout Mode pattern.
The bulls want a big bull day today so that the month closes above the open. There would then be a bull body for October. That would increase the chance that November might trade above the October high. But with the Emini down 30 points in the Globex session, the open of the month is 100 points higher. Today will probably not get there. October should end up with a bear body.
Since the ioi is forming at the top of a 3-year trading range, the odds are slightly greater for a reversal down than a resumption up. The more bearish October is, the more likely November will trade below the October.
But even if the Emini does trade down, the best the bears will probably get is a 1 to 2-month pullback to the middle of the yearlong range. This is not a major top formation, given how strong the summer rally was.
What about the US election?
Who cares? The president is not important when it comes to the stock market. Conventional wisdom is that republicans are better. But look at the huge rallies during Clinton and Obama and compare them to the sideways trading under Bush and Trump. It’s the Fed, not the president.
Overnight Emini Globex trading
The Emini is down 31 points in the Globex session. But it will still open within yesterday’s range. Yesterday was a big outside day. The day after a big outside day tends to be a 3rd mostly sideways day. There should therefore be buyers around yesterday’s low. That includes below yesterday’s low, if today breaks below it. But there will also be sellers around yesterday’s high, which is now the top of a 2-day trading range.
While today is likely to mostly overlap yesterday, yesterday was huge. Therefore, the legs up and down today should be big enough for swing trading. But because of the increased chance of a trading range day, traders should look for reversals after every 1 to 3-hour leg up or down.
Any day can become a trend day. Therefore, a leg up or down can last all day. As I said, the legs should be big enough for swing trades. If a swing lasts all day, day traders will swing trade in that direction all day.
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 has sold off for 4 days. But yesterday was a big day, which usually will attract some profit-taking. Also, the EURUSD is now just above the bottom of a 3-month trading range, which is support. Finally, today is the last day of the month. The month so far is a bear inside month after an inside down month in September. The bulls will try hard to keep the low above the September low.
All of these factors reduce the chance of another big bear day today. But after 4 bear days, today will probably not be a big bull day either. That means it should be more of a trading range day.
Yesterday broke below the October 15 higher low. Traders are deciding if the breakout will be successful and continue down to the next support, which is the September 25 low. The odds will go up if today closes below the October 15 low and if the day has a bear body. Therefore, all that the bears need today is a small, sideways day. They do not need a big bear day.
The bulls do not need much either. They want today to close above the open, which would create a bull body on the daily chart. That would be bad follow-through after yesterday’s breakout and reduce the chances of the selloff growing into a bear trend. Additionally, they would like today to close back above the October 25 low, which is only 17 pips above the current price.
With neither the bulls nor the bears needing a big move from here, there is a reduced incentive for a big move. Also, the day after a sell climax day usually is smaller and sideways.
While all of these factors make a small, trading range day likely, traders will be quick to switch to swing trading if the day begins to trend.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market has been sideways in a 25-pip range overnight. It is at the open of the day and at yesterday’s close and just below the October 15 low.
So far, day traders have only been scalping. Because of what I wrote above, they expect today to remain a trading range day. But if there are several big trend bars up or down, they will switch to swing trading.
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 strongly on the open to below yesterday’s low, and it then entered a trading range. The bulls got a late reversal up to close above the middle. Today is therefore a weak buy signal bar for Monday.
The bears failed to get a breakout below the September low. October is therefore an inside bar on the monthly chart. There is now an ioi Breakout Mode pattern on the monthly chart.
On the monthly chart, October is a bear bar closing on its low and a sell signal bar. The context is good for the bears as well. The monthly chart is reversing down from the top of its 3-year trading range for the 2nd time in 3 months. This makes at least slightly lower prices likely in November.
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.
