Emini and Forex Trading Update:
Wednesday October 23, 2019
I will update again at the end of the day.
Pre-Open market analysis
Yesterday was an outside down day on the daily chart and it closed near its low. It broke above a 5 day wedge top and reversed down. It is therefore a sell signal bar for a failed breakout below a wedge top. In addition, it is the 2nd lower high since the July all-time high. As a result, it is a sell signal bar for a reversal down from the top of a 4 month triangle.
This is also a failed breakout above the 3000 Big Round Number. If the bears get a bear bar today, especially a big one, there will probably be a couple small legs down over the next week or two. An obvious target is the big gap above the October 10 high.
If instead today is a bull inside day or a bull reversal day, today will be a buy signal bar for tomorrow. The bulls would again have about a 50% chance of a new all-time high within a few weeks.
Today will tell us what to expect next week
Today is important because it will give a clue for what to expect over the next week. If today is an inside day or if it trades below yesterday’s low and reverses up, it will be a buy signal bar on the daily chart for tomorrow. Traders would then discount yesterday and assume that the rally will continue up to a new high. If there is a new high in October, there would be an outside up bar on the monthly chart.
On the other hand, if today goes below yesterday’s low, it will trigger the sell signal. This is likely. If today is a big bear day closing on its low, the selloff will probably continue down for at least another week and close the gap at 2948.25.
Overnight Emini Globex trading
The Emini is down 1 point in the Globex session. The problems for both the bulls and bears are that most days over the past 2 weeks have had reversals and the chart has been sideways for 6 days. These factors reduce the chance of clarity today. Therefore, today will probably not be a big bear day closing on its low. In addition, it will probably not be a big bull day closing on its high.
Day traders expect confusion and at least one reversal today, like most recent days. But because of the increased chance of a trend day up or down, they will be willing to swing trade if they see 2 – 3 strong trend bars up or down with no significant tails. The odds favor more trading range price action instead of a relentless trend today.
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 pulled back for 3 days after a parabolic wedge rally to the 21 month bear trend line. The rally is the strongest one in over a year. Traders expect at least a small 2nd leg up after a 1 – 3 week pullback.
However, most reversals require a micro double top. Therefore, there will probably be a test of Monday’s high before the pullback begins.
The bears want the rally to be just another bull leg in the 21 month bear channel. But since the rally has been unusually strong, traders will buy the 1st 1 – 3 week pullback to around the EMA. Therefore, traders expect a higher low in a few weeks and then a 2nd leg sideways to up over the following several weeks. As a result, the downside over the next couple weeks is probably not lower than 1.10.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart traded below yesterday’s low overnight. This is now a 2 day pullback. There were buyers below yesterday’s low and the bulls so far have a small bull reversal day. But the range is small and therefore there is no energy. This reduces the chance of a trend day.
If today closes below the open, today will be the 3rd consecutive bear bar on the daily chart. That often is the start of a leg own. But because the bars are small, the bears will probably need a close on the low to increase the chance of more selling tomorrow.
More likely, today will close around the open. It will therefore be a small reversal day on the daily chart, making it a High 1 buy signal bar for tomorrow. But since there will probably be a micro double top within a few days, the upside over the next few days is small. With limited downside and upside, traders expect a continuation of 4 day tight trading range 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 up strongly on the open from below yesterday’s low, but the day evolved into a trading range day. The bears wanted a big bear day for their entry bar on the daily chart. That would have increased the chance of filling the gap above the October 10 high.
Instead, the day closed near its high. Because today is a 1 day pullback in a bull trend, it is a High 1 Bull Flag buy signal bar for tomorrow. It therefore erased much of yesterday’s bearishness. The Emini once again has about a 50% chance of making a new high this month or within a few weeks.
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.
