Emini and Forex Trading Update:
Thursday December 5, 2019
I will update again at the end of the day.
Pre-Open market analysis
The Emini gapped up yesterday and formed a 1 day island bottom. Last week was a bull bar on the weekly chart and therefore a bad sell signal bar. Some bulls theoretically bought below its low and scaled in lower. They were confident that any selloff would come back to last week’s low. It did yesterday.
The bulls are hoping that the rally will continue up to the all-time high. However, the selloff was strong enough to make at least a 2nd leg sideways to down likely.
Also, the Emini is back in the 6 day tight trading range from 2 weeks ago. Furthermore, the past 2 bull days had prominent tails on top on the daily chart. It therefore might go sideways here for a few days. Additionally, the Emini might go sideways into the December 15 China tariff announcement.
The 2 day rally was not particularly strong on the 5 minute chart. It looks more like a bull leg in a trading range than a resumption of a bull trend. There was a lot of trading range price action during both days. Day traders will expect more trading range price action again today.
Overnight Emini Globex trading
The Emini is up 10 points in the Globex session. Traders are debating whether the 2 day rally is a resumption of the 2 month bull trend or a pullback in a new bear trend. They might need a few days to decide.
The Emini has retraced about half of the selloff. In addition, it’s back to the middle of the range of the past 4 weeks. Finally, there was a lot of trading range price action over the past 2 days. These factors make more sideways trading on the daily chart likely.
Additionally, they make more trading range price action on the 5 minute chart likely. Day traders will expect trends to be brief and have bad follow-through. In addition, there should again be many reversals.
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 has been in a small trading range for a month. There is both a double top and a double bottom. This range is within a bigger 5 month trading range. The EURUSD Forex market is in breakout mode.
Since the October rally was the strongest in 2 years, traders expect at least a small 2nd leg sideways to up. It is possible that the double top over the past 3 weeks is all that they will get. It is more common for the 2nd leg to get at least up to the top of the 1st leg. Consequently, traders expect a test of 1.12, the October highs, and the 14 month bear trend line.
Furthermore, even if the bears succeed in getting a breakout to a new low, traders will buy it. They have bought every new low in the 2 year bear channel and will do it again. Therefore, the downside is limited over the next month.
Unfortunately for the bulls, the upside is small as well. This is because the monthly chart has been in a tight bear channel. The 1st breakout above a tight bull channel is usually minor.
That means it usually leads to a trading range before it can become a bull trend. Traders should expect a continuation of the 5 months of sideways trading for at least another month.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market has been within a 25 pip range overnight. It has not broken out of yesterday’s range. Today is a small inside day so far. In addition, it is the 3rd consecutive sideways day. Day traders are scalping, looking for reversals.
Because the EURUSD is at the top of its month-long range, a breakout up or down can come at any time. The quite overnight trading makes it unlikely to come 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 strongly on the open from above yesterday’s high. However, the selloff reversed up from above yesterday’s low and tested yesterday’s high at the end of the day. The bears were unable to create an outside down day.
Last week was a bull bar on the weekly chart. It was therefore a weak sell signal bar, especially since there is a 9 week bull micro channel. There were likely to be more buyers than sellers below its low, and there were.
Last week’s low has been important all week. For example, the bulls tested it on the open today and again late in the day. It will continue to be important tomorrow, especially in the final hour. The bulls want the week to close above last week’s low as a sign of strength. That would increase the chance that the selloff has ended and that the Emini will continue up through the end of the year.
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.
Al, the near 10 point bear bar at 11:55AM PST threw me off because, despite being a surprise bar, there was no follow through. What did you make of it?
Thanks.
It was just an usually big end of the day bear trap. The Emini fell 6 points in 1 second. It has done this many times over the past couple months, and each time it reversed back up. One of these days, it will not. Instead, it will probably lead to a sustained selloff that could last many days.