Emini and Forex Trading Update:
Thursday May 28, 2020
I will update again at the end of the day.
Pre-Open market analysis
Yesterday traded below Tuesday’s low and then above its high. It was therefore an outside up day. That increases the chance of higher prices today or tomorrow.
The Emini is in the Sell Zone on the daily chart, which is between the 200 day moving average and the March 3 lower high. It will probably get to the March 3 high before exhausting itself. Once the bulls are exhausted, there will probably be a 50% retracement of the 2 month rally.
Tomorrow is the end of the month. Traders are thinking about what May will look like on the monthly chart. If the bulls can get May to close near its high, traders will expect higher prices in June.
The bears want a conspicuous tail on the top of this month’s candlestick on the monthly chart. To achieve that, they will need May to close at least 50 points below this week’s high. There is therefore an increased chance of a selloff today or tomorrow. If the bears succeed, it will reduce the chance of the bulls having a strong June.
Regardless of what happens, traders should expect a selloff for several weeks now that the daily chart is in the sell zone. It probably will begin closer to the March 3 high.
Overnight Emini Globex trading
The Emini is up 2 points in the Globex session. Yesterday rallied in a very strong bull trend. That typically attracts profit taking. There is a 75% chance of at least a couple hours of sideways to down trading today that starts by the end of the 2nd hour.
For the bears, their 1st target is the bottom of the most recent buy climax from yesterday. That is around 12:10 PST on the 5 minute chart. They probably cannot get a strong trend down without the Emini first transitioning into a trading range for an hour or two.
The bulls always want a big bull trend day. After a buy climax day, there is a 50% chance of some follow-through buying in the 1st 2 hours, but only a 25% chance of another strong bull day.
After a big outside up day, there is an increased chance of an inside day. If today opens below yesterday’s high, it might reverse down from below yesterday’s high. Since yesterday’s range was big and today will open near yesterday’s high, today will probably not fall below yesterday’s low.
EURUSD Forex market trading strategies
The EURUSD Forex market on the daily chart has rallied to slightly above the 2 month trading range. But the breakout so far is small and it has a wedge shape.
If the bulls do not start to get closes far above the top of the range, traders will expect a test back down. A test of resistance often has 3 legs up, which means it is a wedge. A wedge is a type of sell climax.
When there is a reversal down, traders look for at least a couple legs down. The 1st target for the bears is the bottom of the most recent leg up. That is the May 25 low.
May ends in a few days. So far, it is within the April range on the monthly chart (not shown). April is also within the March range. Consecutive inside bars is an ii pattern (inside-inside). That often leads to a breakout that lasts many bars. Traders might be waiting for June before creating a strong breakout.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market has been in a small range overnight. It traded again above the May 1 high but reversed down.
Today so far has a bull body on the daily chart. However, the bodies are shrinking as the bulls try to get a successful breakout. Shrinking bodies mean there is a loss of momentum. There are fewer bulls eager to buy at this price.
The bulls still hope for a strong breakout. At a minimum, they want another bull body on the daily chart. They will buy selloffs and try to have the day close above the open. They prefer to have it close above yesterday’s high. That would indicate that the momentum is increasing. It would increase the chance that this breakout will be successful.
The bears want today to be a sell signal bar on the daily chart. They hope the rally is just a wedge buy climax and a test of the top of the 2 month range. The bears have been selling rallies overnight, but have been unable to make more than a scalp. They will try to get today to close below the open. Today would then have a bear body and be a better sell signal bar on the daily chart.
So far, the bars and legs today have been small. Day traders have only been scalping. Because the daily chart is at a critical location, there is an increased chance of a surprisingly big move up or down. However, the odds favor a continuation of the quiet trading and small range.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
After a trading range open, the Emini rallied in a bull channel today. It got back above 3044.25, which is 10% down from the high. It therefore was no longer in correction territory. However, it collapsed back to that price, which was near today’s open, in the final hour.
Today was a reversal day on the daily chart. It is therefore a sell signal bar. However, the bears took profits into the close and today had a prominent tail below on the daily chart.
Remember, the Emini is in the Sell Zone. I went short today and I plan to scale in higher. The rally might reach the March 3 high before the reversal down begins. The Emini should retrace about half of the 2 month rally before making a new all-time high.
Traders are paying attention to that 10% pullback level. It is therefore a potential magnet tomorrow.
Tomorrow is the end of the week and of the month. Both charts are bullish. But there is often profit taking just before a closes. Therefore, there is an increased chance of at least a small reversal down tomorrow, especially in the final hour. Also, after 2 strong days up, tomorrow will probably not be a strong bull day.
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 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.