Emini and Forex Trading Update:
Monday November 19, 2018
I will update again at the end of the day.
Pre-Open market analysis
Yesterday went above last week’s high and therefore made another all-time high. Furthermore, it was the 7th consecutive bull trend bar on the daily chart. That is unusual and therefore climactic. Also, the past 2 weeks formed a 3rd leg up in a tight bull channel on the daily chart. As a result, the chart has a parabolic wedge buy climax, which usually will attract some profit takers.
In addition, last week was a bigger bull bar on the weekly chart. When there is a bigger bull bar after about 5 bars in a Buy The Close rally, it typically begins to attract profit-takers. Many bulls begin to prefer to buy pullbacks instead of buying at the market and on strong bull closes (“Buy The Close” type of bull trend).
This increases the chance of a bear bar this week on the weekly chart. A 7th consecutive bull bar on the weekly chart would be very unusual. However, the bulls will buy the 1st 1 – 2 week, 50 – 100 point pullback.
While most recent days have had a lot of trading range price action, there is an increasing chance of one or more strong bear trend days soon. Until then, the bulls keep buying every pullback on the 5 minute chart. They might continue to do so until the Emini reaches the top of the channels on the daily and monthly charts at around 3150 – 3175.
Overnight Emini Globex trading
The Emini is up 8 points in the Globex session. It therefore might gap up on the open. Since the rally is very strong on the daily charts, the Emini might get vacuumed up to the monthly bull trend line at around 3175 within the next couple weeks.
Most recent days have had a lot of trading range price action, yet all have closed above the open. Even though this is an extreme buy climax, day traders are continuing to focus on buying. They will continue to do this until there is a strong reversal down.
This is like a game of musical chairs. Once the music stops, there will be a panic to grab a chair (exit longs). Right now, the music is still playing. But, it could stop any day this week. That would result in a bear trend 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. 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 is in the middle of a 4 month trading range. That means that the bulls and bears are balanced. Furthermore, a trading range always has both a reasonable buy and sell setup. The bulls want the higher low major trend reversal to lead to a 2nd leg up from the October 1 wedge bottom.
However, the weekly chart has been in a bear channel for 2 years. The bears have sold every 2 – 4 week rally. They see this 3 day rally as forming a double top bear flag with the micro double top of November 6 and 7. They want a break below the October low and another new low in the 2 year bear channel.
Trading ranges constantly disappoint bulls and bears. Every move up or down is more likely to reverse than to begin a trend. Consequently, this 3 day rally might test down to the November 14 low before reaching the October high.
Even though the weekly chart is in a clear bear trend, the daily chart is in a trading range. Traders continue to sell rallies, buy selloffs, and take profits every week or two.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market has been in a 20 pip range overnight. Traders are deciding whether the 3 day rally will continue up to the October 31 high or reverse down to the November 14 low.
Yesterday’s high and the November 6 and 7 highs are important resistance. Unless the bulls get a breakout above those highs today or tomorrow, they will exit. Traders would then expect a test of the November 14 low.
The lack of momentum overnight is a sign that traders will probably need another day to decide. Consequently, day traders will continue their overnight scalping today unless there is a surprisingly strong breakout up or down today.
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 reversed down from above yesterday’s high on the open. But there were buyers above yesterday’s low and they prevented today from becoming an outside down day.
However, they could not prevent today from being the 1st bear bar on the daily chart in 8 days. That increases the chance of a pullback tomorrow. But after 7 consecutive bull days, the 1st reversal down will probably only last a day or two.
Buy climaxes do not last forever. Traders should still expect the start of a 2 week pullback by the end of the month. After 6 consecutive bull bars on the weekly chart, the bears will probably need at least a micro double top before they can get more than a 50 – 100 point pullback.
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.
