Emini and Forex Trading Update:
Tuesday September 15, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini has been in a tight trading range for 5 days just above the 50 day MA. Even though it is likely working down to below 3200, it is oversold and at support. It therefore should bounce this week to 3450 – 3500 before resuming down. Tomorrow’s 11 am PST FOMC announcement is a potential catalyst for a big move up or down.
Last week was a High 1 buy signal bar on the weekly chart. I have been saying that this week would probably go above last week’s high and trigger the buy signal. That will probably happen today.
But I also said that last week’s candlestick was a bear bar, which is a weak buy signal bar. Furthermore, it followed an outside down bar at the top of a 3 year bull channel. Also, there were climactic streaks of 7 and 9 consecutive bull days on the daily chart.
This is bad context for the resumption of the bull trend. Traders expect a lower high and a 2nd leg sideways to down.
Overnight Emini Globex trading
The Emini is up 25 points in the Globex session. It might gap above yesterday’s high. But a small gap typically closes early in the session and is usually only a minor event.
While the Emini is in the middle of its 5 day trading range, traders expect it to work higher. It could go a little above the top of the range at around 3500.
However, because it is in a trading range on the daily chart, there is an increased chance of more trading range price action on the 5 minute chart. Day traders expect at least one leg up and one leg down today.
Yesterday rallied and then sold off in a bear channel. A bear channel is a bull flag. Today was likely to break above the channel.
The fight today will be over last week’s close. Will the Emini break far above, increasing the chance of the rally continuing to above 3500 over the next week? Or, will the Emini stall around last week’s high and form a small double top bear flag on the daily chart?
In either case, traders will probably wait for tomorrow’s 11 am PST FOMC announcement to decide if the rally is ending this week or continuing to 3500.
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 been working higher from a double bottom bull flag at the 20 day EMA. It is important to note that it has been in a tight trading range for 7 weeks. That is not possible unless the bulls and bears are balanced. Therefore, while 5 bull days is good for the bulls, there is no breakout yet. Traders still believe that the 5 day rally is more likely going to form a lower high than successfully break above the range.
Just look back at the 5 bull days in August. They broke to a new high, but then the EURUSD reversed down in a bear leg in the range.
Five consecutive bull days, assuming today remains a bull day, make at least a small 2nd leg sideways to up likely. Therefore, traders will buy the 1st 1 – 3 day pullback.
Tomorrow’s 11 am PST FOMC announcement is a potential catalyst for a big move up or down. It slightly increases the chance of a break above or below the range.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market rallied to above yesterday’s high, but then entered a 25 pip tall trading range for 10 hours. Also, the entire day’s range has been small. Day traders are continuing to scalp for 10 pips up and down while they wait for a breakout.
Will today remain a bull day on the daily chart, or will it close on its low and form a sell signal bar for a lower high? With the range as small as it has been overnight, the EURUSD does not need a big move up or down to form either a bull day closing on its high or a bear day closing on its low.
However, each of those possibilities affect the probability for tomorrow’s direction. The bulls will try to get the day to close on the high and the bears want to get it to close on the low.
With the small range, there is no conviction. Day traders so far are just scalping, betting that the range will remain small.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
I will post chart after the close.
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 gapped up but then formed a small trading range for the 1st 4 hours today. The bears got a breakout that closed the gap on the daily chart. Traders bought a reversal up from wedge bottom sell climax to the 60 minute EMA. Today closed just below the open. It was a doji bar on the daily chart and a weak sell signal bar for tomorrow.
Because the daily chart is so oversold and the 5 month rally was so strong, traders expect more of a bounce before there is a 2nd leg down. Whether or not there is a bounce, traders expect the selloff to continue to 3000 – 3200. If there is a bounce, the Emini should test 3450 – 3500.
Tomorrow is the final FOMC meeting before the election. The Fed will not do anything different because it does not want to influence the election. However, traders should be prepared for anything after the announcement at 11 am PST. The market could trend up or down strongly, or reverse.
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.
Hello Dr. Brooks,
It is a mystery that a gap acts like a magnet and is always revisited. Is the converse ever possible? That is, a gap never filled? AAPL has 3 gaps in recent time – (a) 7/30, (b) 7/31 and (c) 8/3. Theoretically, does the premise that they all will be eventually filled hold? In terms of price-action.
Thanks again.
-Shafiq
I have answered this a few times. Most markets are in bull trends. That means they form higher highs and lows over time. For big markets, they eventually form a new high. That means every gap down gets filled. But since they do not go to zero, about 20 – 30% of gaps up never get filled.