Emini and Forex Trading Update:
Monday September 21, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini last week traded above the high of the week before and then below its low. Last week was an outside down candlestick on the weekly chart. That reduces the chance of a strong rally this week.
There now 3 consecutive bear bars on the weekly chart. That has not happened since the 5 bear bars during the pandemic crash. The most recent time before that was 6 years earlier. This means that there is an increased chance of a bull bar on the weekly chart either this week or next.
I have been saying that the bears are trying to make September an outside down month. That would increase the chance of lower prices in October. The overnight low is currently below the August low of 3266.25.
Also, I said that if September went outside down, it would likely close the gap above the July high. Remember, there was a rare gap up on the monthly chart in August. The July high is 3261.50, and the Emini’s overnight low is below that high.
The bulls are hoping that last week’s bear breakout will fail and that the Emini will soon break above the 2 week trading range. However, I have been saying since late August that the Emini should fall to 3000 – 3200. This is still true, even though there can always be a surprising strong rally for several days before it reaches its target. Traders will sell the 1st 1 – 3 bar rally.
Overnight Emini Globex trading
The Emini is down 65 points in the Globex session. If the day session opens here, September will be an outside down month and it will have closed the gap below the August low.
But what will happen next? When there is a big gap down on the 5 minute chart, the Emini is far below its average price. I use the 20 bar EMA as a measure of what is average. The bears are willing to sell if the early bars are strongly bearish. If they are not, the bears will look to sell higher.
The bulls often see a big gap down as an opportunity to buy for a bounce and possible a bull trend day. If there are early strong bull bars, the bulls will buy.
Most often, a big gap leads to a trading range for the 1st hour or two. The bulls will then look to buy a reversal up from a wedge bottom or double bottom. The bears want to sell a wedge rally to the EMA or a double top around the EMA.
If there is an early trading range, it is a sign of balance. That reduces the chance of a breakout leading to a trend that will last all day. There might be a 2 – 4 hour trend in either direction, but it typically will get exhausted before the end of the day.
Friday’s setups
Here are several reasonable stop entry setups from Friday. 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. I do not want the lines to be distracting. If they are longer, I make them dotted. But, they have to be visible, so I make the shorter ones solid. 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 is again testing the neck line of the 4 week head and shoulders top and the bottom of the 8 week trading range. I have been saying that a tight trading range is neutral, but because of the wedge buy climax to resistance on the weekly chart, this one has a slightly higher chance of a bear breakout.
The bears want a pullback to the June 10 high. That was the breakout point for the July rally and it is about a measured move down. It is therefore a magnet below. The June 19 low was the start of the strong July rally. It, too, is a magnet if the EURUSD starts to work lower.
With the Fed saying that it wants to increase inflation, that will result in increased interest rates in the US. Money from around the world will get drawn to the US to get higher returns. If so, those foreign currencies will be converted to dollars. That demand for dollars could be the catalyst for a fall in the EURUSD.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market traded above Friday’s high and reversed down strongly to below Friday’s low. Today is therefore an outside down day.
The EURUSD is now testing the bottom of the 8 week tight trading range. This increases the chance of a bear breakout this week and then a move down to at least 1.1422 at the June 10 high.
Trading ranges resist breaking out. The bulls will therefore try to stop the overnight collapse. But when a selloff is as strong as this one has been, the best the bulls can usually do is convert the strong bear trend into a trading range.
Day traders overnight sold aggressively during the collapse. Although there was some profit taking for a few hours, the bulls took quick profits. Day traders have been selling. It will continue to be better to only sell until the EURUSD enters a trading range.
But even if it does, if today closes near the low of the day, it will increase the chance of a successful break below the 8 week trading range and a quick move down for 300 – 500 pips.
At some point today, traders will begin to take profits at the low and then only sell again after a 20 – 30 pip bounce. If the bulls get that bounce, they will start to buy reversals up for scalps. However, it will probably be easier all day for sellers than buyers to make money.
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. I do not want the lines to be distracting. If they are longer, I make them dotted. But, they have to be visible, so I make the shorter ones solid. 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
The Emini gapped below last week’s low. It also gapped below the August low. September is now an outside down month on the monthly chart. Additionally, it closed the rare monthly gap above the July high. I said when it formed that it was probably going to close within a bar (month) or two because small gaps typically soon close.
Despite the gap down the weekly chart, the Emini is now at the 20 week EMA and it is oversold on the daily and 60 minute charts. Also, after 3 bear bars on the weekly chart, this week or next week should be a bull bar. Today closed on its high and it is a buy signal bar for tomorrow.
Even though the Emini should fall to between 3000 and 3200, it does not have to get there this week. With it oversold and at support, it might bounce for 1 – 3 days first. This is especially true since the entire 4 week selloff is probably only a minor reversal down on the daily and weekly charts.
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.
