Emini and Forex Trading Update:
Wednesday October 9, 2019
I will update again at the end of the day.
Pre-Open market analysis
Yesterday gapped down and formed a 2 day island top on the daily chart. It closed on its low and therefore erased much of last week’s island bottom and rally.
The bulls need a rally today to create a strong buy signal bar. If the bears instead get another bear day, traders will see last week’s rally as simply a pullback from last week’s selloff.
It is important to pay attention to context. On the daily chart, look to the left. The Emini is now in the August trading range where there were many big legs up and down. The past 2 weeks are duplicating this price action. Traders see the Emini as again in Breakout Mode.
Overnight Emini Globex trading
The Emini is up 26 points in the Globex session. It will therefore gap far above yesterday’s close and erase much of yesterday’s late selloff.
Since the odds favor a 2nd leg up on the daily chart, there is an increased chance of a bull trend day today. Also, a big gap up today would reduce the chance of a big bear day, which the bears need to regain control.
The Emini has had several big moves up and down over the past week. That is trading range price action. It increases the chance of reversals on the 5 minute chart. Monday and yesterday had rallies that reversed down, and yesterday had an early selloff that reversed up. Day traders will be ready for more reversals again today.
However, the legs up and down have been big enough for swing trading on the 5 minute chart, and the odds still favor a test of Monday’s high within a few days.
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 EURUSD daily Forex chart has been sideways in a tight trading range for 5 days. The bulls want a 2nd leg up from last week’s reversal up from the bottom of the bear channel. Their minimum goal is a test of the top of the channel.
Since that is only 30 pips above today’s high, the should achieve that goal this week. When the market gets close to an important magnet, it usually cannot escape the magnetic pull. The test can come from either a small rally or by another couple days of sideways trading.
Because the EURUSD daily and weekly charts have been in a weak bear channel for about 2 years, traders expect a lot of trading range price action. That means markets typically go beyond support or resistance before reversing. Also, this 2 week rally has been smaller than most other rallies. Traders should expect a test of higher resistance, like the September 3 lower high of 1.1110 before there is another new low.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart rallied 35 pips early in the European session. It has been sideways for 5 hours. This is probably going to be a bull flag. Traders should expect at least a small 2nd leg up.
However, it is now near the top of the 5 day tight trading range. That means it is around a price level where it has turned down many times over the past week. Consequently, the 2nd leg up might be small. This is true even though the two week weak rally will likely go at least another 30 pips above today’s high within a few days.
When a rally tests resistance and there is other resistance not far above, it usually breaks through the 1st level. As a result, the rally will probably continue up for another 100 pips at some point in the next couple weeks.
But the bulls need a strong breakout above the 5 day tight trading range. Until they get it, day traders will continue to scalp. Since the biggest pullback in the past 10 hours has only been 15 pips, day traders are mostly only looking to buy. They will not sell until there is a clear top or a strong reversal down.
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 formed a bull trending trading range today. It sold off into the close and formed a bull doji bar on the daily chart. Today is therefore a weak buy signal bar for tomorrow.
The bulls see the 2 day selloff as a pullback from last week’s reversal up from a bear trap. But this week’s selloff was deep enough to make traders wonder if the rally was a trap as well. The bulls argument is still slightly stronger.
The past 3 days were trading range days. Also, the Emini is back within the August trading range where there were many abrupt reversals. Until there is a clear buy or sell setup or strong breakout up or down, traders will continue to take quick profits and bet on more trading range price action.
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 Intraday Market Update page.
Why don’t you consider the European and Asian market candles in the SP500?
If you are in the chat room, you will see that I have a 15 minute chart of the 24 hour market. So I do pay a little attention to it. Many traders trade the 24 hour 5 minute chart.
I could trade both, but I see at least 50 reasonable setups a day on the day session chart. That is far more that I need. Also, yesterday’s day session and prior days provide lots of support and resistance for today’s trading.
Additionally, there are often protracted tight trading ranges overnight. They push yesterday’s bars too far to the left, and those bars are much more important that the quiet overnight bars.
Since I only want one chart, I have to pick. I use the day session chart because it tracks the stock market and I like to feel connected to that market and to Wall St. I traded with friends many years ago who preferred the 24 hour chart. One friend used the 24 hour chart for the 1st hour and then switched to the day session chart. It does not matter which a trader chooses as long as he does a good job trading what’s in front of him.