Emini and Forex Trading Update:
Wednesday November 4, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini gapped up yesterday, creating a 4-day island bottom. But the day closed in its middle, like the 3 prior days. This makes the reversal up a little less bullish. However, a reversal up from a sell climax typically has at least a couple legs of sideways to up trading. Traders therefore expect at least slightly higher prices over the next week. This is true regardless of the outcome of the election.
The Emini has been oscillating around the February high for 3 months. Yesterday broke above it but closed below it. Today will probably gap up above it.
The Emini was sideways for 5 days in late October at around 3450. That is therefore an area of agreement. The 3-day reversal up is probably strong enough to get there again within a few days.
Even though the Emini has been in a trading range for 3 months, there are also several factors that increase the chance of a surprisingly big move up or down at any time. The Emini is reversing up from a parabolic wedge sell climax at support on the daily chart. That is bullish. But there is an ioi sell signal on the monthly chart. Also, there is an FOMC meeting tomorrow. And then this is an unusual election, and there will be ugly lawsuits in many states. This will likely end up in the Supreme Court.
Traders need to be open to anything this week. But even if today has a lot of trading range trading, the range will probably be big enough for swing trading.
Overnight Emini Globex trading
The Emini is up 53 points in the Globex session. There will probably be a big gap up today. When there is a big gap, the Emini is far above the EMA, which is the average price. Bulls do not want to pay far above average unless they are buying very strong bull bars. The bears will sell a strong reversal down. There is only a 20% chance of a strong trend up or down on the open that will last all day.
If today is a trend day, up is more likely. Also, it will probably be a weaker type of trend, which means it will probably have at least a couple hours of trading range trading at some point.
What is most likely on the open? A big gap usually leads to a trading range for the first couple hours. The bears want to sell a double top or a wedge rally. The bulls want to buy closer to the EMA. They will look for a double bottom or a wedge bottom near the EMA.
It is important to note that yesterday’s early rally on the 5-minute chart was a Major Bull Surprise Breakout. That usually leads to follow-through buying for at least a few days. Consequently, traders will look to buy selloffs today. The Emini should work higher.
Overnight trading was extremely volatile. There was a big rally, a selloff to a new low, and then a rally back up to the overnight high. That confusion is a sign of balance. It increases the chance of trading range trading. Since a big gap up usually leads to a couple hours of trading range trading, today will likely begin with a trading range.
With big bars and big legs overnight, even if today is a trading range day, day traders expect at least one swing trade.
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 is forming a big doji bar so far today. Today traded above and below yesterday’s range and is therefore an outside bar.
More importantly, it reversed up from below a 2-week parabolic wedge bottom and from below the September low. Traders see this as a potential failed bear breakout.
If today closes near the middle of the day’s range or near the high, traders will expect a couple legs sideways to up. If the EURUSD starts to break above the EMA, traders will expect a rally. The minimum goal would be a test of the October 21 lower high.
But if the EURUSD goes sideways and is unable to break above the EMA, the bears will try again to break below the September low. The sideways trading will be a bear flag.
At the moment, traders need more information. They therefore expect sideways trading at least through tomorrow.
Will the EURUSD form some bull days and get above the EMA? Traders would then look for higher prices.
Or, will the EURUSD stay sideways for several days and have several bear bodies? Then traders will expect another bear breakout attempt and a move down to the March high, just below 1.15.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market has a big range today. It reversed down from above yesterday’s high and then up from below yesterday’s low. It is therefore an outside day on the daily chart.
It is now trading around the open of the day. That makes the day a doji bar on the daily chart, which is neutral.
Big, Up, Big Down, Big Up creates Big Confusion. Confusion is a hallmark of a trading range. Consequently, there is an increased chance of trading range trading for the remainder of the day. Traders will look for reversals up and buy for 10 to 20-pip scalps. They will also sell reversals down for scalps.
Can today enter a sustained trend up or down for the remainder of the session? It probably will not. With today now being a big outside doji bar on the daily chart, it is telling us that traders are exhausted. They will therefore not want to exert themselves again today. Today will probably go sideways around the open and close near the open.
But that can always change. If the chart begins to form a series of strong bull or bear bars, traders will switch to swing trading. Sideways is more likely.
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 and rallied strongly on the open. It then entered a tight bull channel. After 3 legs up, it reversed down in an Endless Pullback, which was a Small Pullback Bear Trend. Like the past 4 days, it closed in the middle of the range.
When there is a surprisingly big move up, like the past 2 days, many bears are trapped into a bad short, and the bulls who have not bought are trapped out of a great long. That means there are bears and bulls looking to buy the 1st pullback. Consequently, there should be at least a 2nd leg sideways to up after a 1 – 3 day pullback.
Will tomorrow continue the pullback? Many bulls have big profits over the past 2 days. They began to take some of those profits in the middle of the day today. That increases the chance of a sideways to down day tomorrow or Friday.
Last week was a big bear bar on the weekly chart. Today broke above its high. That should be a magnet tomorrow or Friday. The bulls want the week to close above last week’s high and the bears want it to close below. No matter. The odds favor at least slightly higher prices over the next week or so.
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.
