Emini and Forex Trading Update:
Friday April 23, 2021
Pre-Open market analysis of daily chart
- Yesterday was an Emini outside down day. It traded above Wednesday’s high, and then below its low.
- There is now a small lower high double top on the daily chart, and therefore an increased chance of a pullback.
- But trends resist reversing. Therefore it is still more likely that the Emini will stay sideways, or go a little higher.
- Yesterday closed above Wednesday’s low, and the Emini has been sideways for 8 days. Also, the April bull trend was strong. This is therefore not a strongly bearish event.
- The bulls want a micro double bottom with Wednesday’s low, and then a breakout above yesterday’s high, which is the neckline of the micro double bottom.
- A measured move up would be above 4,200.
- It is more likely that the Emini will continue sideways into next Wednesday’s FOMC announcement.
- Yesterday had a big range with a prominent tail below. That increases the chance that today will be an inside day (not break above yesterday’s high or below its low).
- The streak of 13 consecutive bull days in April is likely to be the final strong move up, before a pullback in May.
- There might be one or two minor new highs before the Emini pulls back.
- Once there is a pullback, it could last a couple months. This is because the April buy climax has been unusually extreme.
- When there is a reversal from an extreme buy climax, the profit taking often leads to a pullback that is deeper, and lasts longer that most pullbacks. Since most pullbacks over the past year were only a week or two, the next one will probably last longer, like last year’s September/October pullback.
- Because the bull trend has been so strong, the bulls will buy the pullback, even if it is more than 10%.
- Today is Friday so the Emini might have a move in the final hour to test support or resistance on the weekly chart.
- After 4 consecutive bull bars on the weekly chart, and with the Emini now below the open of the week, it will probably close below the open of the week.
- Other magnets below are last week’s low and the 4,100 Big Round Number.
- The bulls want the week to close at a new all-time high, but that is unlikely after yesterday’s selloff.
Overnight Emini Globex trading on 5-minute chart
- The Emini is up 4 points in the Globex session.
- Yesterday had a strong selloff, and then it entered a trading range.
- Yesterday ended with higher low major trend reversal. The bulls hope today will trend up.
- The bears want any rally to turn down from below yesterday’s high. That would be a lower high major trend reversal.
- Yesterday was a big outside down day.
- The day after a big outside day is often an inside day.
- Therefore, if there is a selloff, there is an increased chance that it will reverse up from above yesterday’s low.
- There is an increased chance that a rally will reverse down from just below yesterday’s high.
- The day after a big outside day usually does not break far above or below that day. Therefore, there will probably be buyers not far below yesterday’s low, and sellers above yesterday’s high.
- What about yesterday’s news on a tax hike? The market factored that in yesterday.
- However, yesterday’s selloff was a Major Bear Surprise. That increases the chance that it could be the start of a swing down. Traders today will decide if it is the start of a pullback or just a 1-day bear trap.
- Even with that increase in probability of a selloff on the daily chart, the odds are always greater that the Emini will stay sideways until there is a strong breakout with follow-through.
Yesterday’s Emini setups
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- So far, today is big bull day closing near its high. Bulls want resumption of Small Pullback Bull Trend after 3 sideways days.
- Yesterday was an outside down day (it traded above Wednesday’s high, and then below its low), but it closed in the middle, and therefore was not particularly bearish.
- The EURUSD is in the middle of a 9-month trading range, and testing the bottom of a 3-month trading range.
- The 3-week tight bull channel has had 3 or more small legs up. This is a parabolic wedge buy climax.
- It is at the resistance of the bottom of the December to February range, and the 3 past days have had prominent tails on top. There is a 50% chance it will pullback from here, and a 50% chance it will successfully break above the resistance, and test the next resistance, which is the February 25 lower high.
- A Small Pullback Bull Trend is a strong bull trend. Once there is a pullback, it is often more sideways than down.
- Trading ranges resist chance. The 9-month trading range will probably continue for at least a couple more months.
- Today is Friday and weekly support and resistance can be important, especially at the end of the day.
- The bears want the week to close below the midpoint, and below the January 1 low, but they will probably not succeed.
- The bulls want the week to close on the high and far above the January 1 low. Today is currently at the high of the week. That increases the chance of at least slightly higher prices next week.
- If next week is a 4th consecutive big bull bar, the rally should continue up to the February 25 lower high.
Overnight EURUSD Forex trading on 5-minute chart
- Rallying in a Small Pullback Bull Trend since the US session start.
- Day traders have only been buying, and they have been swing trading.
- The day’s range is about the size of an average day. That typically reduces the chance of the rally continuing much higher.
- The bulls do not need it to go much higher. Simply having it stay around the high will create a strong bull bar on the daily and weekly charts, which would increase the chance of higher prices next week.
- Day traders should not sell until the strong rally evolves into a trading range. They should wait until there is at least a 20-pip pullback before considering to sell.
- If the rally converts into a trading range, there will only be a 20% chance of a trend reversal. Therefore, bears should only scalp.
- Even if it converts into a trading range, day traders will continue to buy, but they will switch to scalping.
- Unless there is a series of strong bear bars, day traders should focus on buying.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
- Small Pullback Bull Trend From The Open that broke above yesterday’s high and to a new high.
- There were at least 3 bars with lows below the EMA, which happens 99.5% of the time, even in the strongest bull trend days, like today.
- There was a 20 Gap Bar buy setup that led to a new high, which usually happens.
- Late selloff down to open of the week, but closed above the open of the week. This was the 5th consecutive week with a bull body, which is rare.
- Small chance of gap up on Monday to new all-time high. There would be a gap on the daily and weekly charts.
- Because today was so climactic, there is a 75% chance of at least a couple hours of sideways to down trading on Monday that starts by the end of the 2nd hour.
See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.
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 Time
When I mention time, it is USA Pacific Time (the Emini day session opens at 6:30 am PT, and closes at 1:15 pm PT). You can read background information on the intraday market reports on the Market Update page.