Emini and Forex Trading Update:
Tuesday January 27, 2021
I will update again at the end of the day.
Pre-Open market analysis
Yesterday was an outside up day, an Emini outside bar, but it closed near the open of the day, which is relatively neutral. The bull trend is strong on the daily, weekly, and monthly charts. Traders will continue to buy every 1- to 3-day selloff until there are consecutive big bear days. Then, traders will look for a couple legs sideways to down over the following few weeks.
This is the final week of the month. The bulls want a 3rd consecutive bull bar closing near its high on the monthly chart. That would make higher prices likely in February.
However, the bears will try to get the month to close below the open. That would make traders expect a sideways to down February. At the moment, the open of the month is far below, and therefore it is unlikely that January will close below the open. If this month were to close near its low, the bears expect a selloff in February.
What is likely today? The Emini has been sideways for 4 days. That increases the chance of more sideways trading today. However, the bulls keep getting new highs, and yesterday was a bull reversal day. Therefore, the odds favor another new all-time high today or tomorrow.
Overnight Emini Globex trading
The Emini is up 9 points in the Globex session. It might gap up to a new all-time high. If it does, the gap will be small. Small gaps typically close in the 1st hour.
The bulls want a continuation of their strong rally from yesterday. Additionally, the 4 sideways days in a bull trend is a bull flag. Today is trying to break above the bull flag. A breakout in a bull trend after several sideways days has an increased chance of leading to a bull trend day. But if the Emini reverses down early, it will probably continue the 4-day trading range.
Despite the strong 3-month rally, most days have had at least one swing up and one swing down. Traders will look for that again today, especially with an FOMC report tomorrow.
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. 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 has been in a triangle for a couple weeks, and that triangle is within a 2-month trading range. This is Breakout Mode.
The bulls hope that the trading range is a bull flag. They want a breakout above, and then a rally to above the February 2018 high of 1.2555.
However, the bears want a lower high, and then a breakout below. They would look for a measured move down to the November 4 low at 1.16. The January 22 lower high had a bull body, which is a weak sell signal bar, and the 2-day selloff has been weak. This is not yet a credible lower high major trend reversal (here, it would also be the right shoulder of a head and shoulders top).
The EURUSD is still balanced. There is a 50% chance that the successful breakout will be up, and a 50% chance it will be down. Until there are consecutive closes above or below the range, traders will continue to look for reversals.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market sold off overnight to below yesterday’s low, but then reversed up to above the open. Both the selloff and rally were unimpressive. They look like legs in a trading range day. Day traders have only been buying since the reversal up. The bulls want today to go above yesterday’s high. It would then be an outside up day, which would increase the chance of higher prices tomorrow.
The rally had an initial spike, but has been in a wedge bull channel for several hours. A wedge rally usually transitions into a trading range.
If that happens today, day traders will begin to sell reversals down for scalps. A reversal back down to the low is unlikely. Consequently, bull day traders will continue to buy all day. But if the day evolves into a trading range, which it probably will, the bulls will wait to buy pullbacks instead of buying breakouts.
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. 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
Although today made a new all-time high, it was a trading range day. Because it had a bear body, it is a sell signal bar for tomorrow. However, with the daily chart in a Small Pullback Bull Trend, traders have been buying below the low of the prior day and every 1- to 3-day pullback. This is therefore a weak sell setup.
There is an FOMC announcement at 11 am PST tomorrow. That sometimes is a catalyst for a big move in either direction.
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.
Dear Al,
Emini, is ioi bar 41-42-43 the reason to buy above bar 43?
Thank you.
Yes, 40 is a credible higher low double bottom after a breakout above the bear channel, and 43 is a pullback from the reversal up. It is an ioi and High 1 bull flag early in a bull trend.