Emini and Forex Trading Update:
Tuesday May 5, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini traded below last week’s low yesterday. That triggered a minor sell signal on the weekly chart. But since there is a 6 bar bull micro channel, the reversal down should be minor.
The Emini has probably begun a 2 – 3 week sideways to down pullback to 2600. However, there have been reversals every 2 – 3 days for a month. Therefore, traders should expect bounces on the way down.
Yesterday is a High 1 buy signal bar for today. Also, there is a parabolic wedge bear channel on the 60 minute chart. That will probably lead to a day or two of higher prices. But, if there is a rally, it will probably form a lower high. Traders expect the rally to stall around 2850 – 2900.
Overnight Emini Globex trading
The Emini is up 35 points in the Globex session. It will probably open with a gap up today. There is an increased chance of a 1 – 2 day rally because the daily and weekly charts have had strong rallies. However, the odds still favor 2 – 3 weeks of sideways to down trading. Therefore, the bears will look to sell strength and the bulls will use strength to take brief profits.
Since everyone wants a strong rally so that they can sell at a better price, there is a reduced chance of a strong bull trend day. The expectation is already priced in.
It is important to remember that the purpose of markets is to facilitate trading. They behave in a way to make people want to trade. The best way to accomplish that is by making the greatest number of traders as uncomfortable as possible. That means they constantly surprise and disappoint traders. This creates emotion and increases the amount of trading.
If today opens with a big gap up, the Emini will probably enter a trading range for an hour or two. The Emini should work higher for a day or two. But traders expect lots of time within trading ranges, like most days over the past month.
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 (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 is in a 5 week trading range, which is nested within an 8 month trading range. Legs in trading ranges reverse and constantly disappoint the bulls and bears. There is always both a sell and buy signal. The bears have a small double top. The bulls see the 2 day selloff as a pullback from last week’s rally.
This is only slightly more likely. If the selloff continues down to near the April 24 low, it will probably test the March 23 low. It does not matter which happens because the odds still favor a reversal up when the EURUSD is near the bottom. Until there is a clear, strong break out of the 8 month range, traders will continue to take quick profits and look for reversals.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market sold off sharply early in the European session and then entered a 20 pip trading range. Day traders have been scalping for 4 hours. The bulls want a reversal up. They hope that the selloff is simply a test of last week’s low and that it becomes simply a pullback from the 2 week rally.
Every trading range is a Breakout Mode pattern. However, whenever there is a trading range after a selloff, the chance of a resumption of the bear trend is always slightly more likely than a reversal up, But it is close enough to 50-50 for traders to treat is like it is 50-50. Day traders will continue to scalp today unless there is a strong breakout of the 4 hour range.
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 (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
After gapping up, the Emini rallied to around the 20 week EMA. After forming a double top for several hours, it collapsed. That is where it failed last week. Today is a Low 1 sell signal bar for tomorrow. Since it was a doji bar on the daily chart, it is a weak sell setup.
The rally might continue for another day or two. But, the Emini should form a lower high and begin a swing down to 2600. Even if the bulls break above the wedge on the daily chart, there will probably be sellers above.
This is true even though going above the wedge means going above the April high. April is a buy signal bar on the monthly chart. But, the monthly chart will probably remain in its 2 1/2 year trading range. Consequently, the upside from here over the next couple weeks is not great.
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.
