Emini and Forex Trading Update:
Friday January 8, 2021
I will update again at the end of the day.
Pre-Open market analysis
The Emini formed a 3rd consecutive bull trend day. While it is overbought, traders will keep buying until there is a clear top, or a strong reversal down. There is a measured move target above at 3807.50, based on a measuring gap on the 60 minute chart. That is a magnet above and today should get there.
Today is Friday and the end of a reasonably strong 1st week in 2021. Weekly support and resistance can be important, especially in the final hour. This week is an Emini outside up week. Therefore this week’s open and last week’s high are important. The bulls want today to close above both, and they want the week to close on the high. That would increase the chance of higher prices next week.
For the bears, last year’s high and close are magnets below, as is the 3800 Big Round Number. Both are near the open of this week.
Overnight Emini Globex trading
The Emini is up 16 points in the Globex session. It will therefore open around the measured move target of 3807.50 on the 60 minute chart. That might lead to some profit-taking today, especially after 3 strong bull days. Also, the Emini is breaking above the top of the bull channel that began with the November 9 high. That is another resistance level. But until there is a clear top, traders will be more interested in buying.
Yesterday spent most of the day in a trading range. A trading range late in a bull trend is often the Final Bull Flag. Consequently, if there is an early rally today, there could be a reversal down. Day traders will look for a sell setup for a swing down.
Can today be a strong bull trend day? After a 3-day rally, that is unlikely. If today is a bull trend day, it will probably be a weaker bull trend, like a Trending Trading Range Day. Also, if there is a rally, there is an increased chance of a midday reversal down.
What about a big bear trend day? With the Emini overbought and at the resistance of the measured move target, and the top of the daily channel, the bears could get a bear trend day today. If today starts to reverse, day traders will look for tests of the magnets below. The most important are the open of the week and last week’s high.
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 bull trend since November 4. Last week’s sharp 2-day selloff was a sign that it has also been in a trading range since early December. Traders are deciding if the rally will continue up to the measured move target at 1.2409 and then 1.25 at the February 2018 high, or sell off for several weeks first.
The longer the EURUSD stalls, the higher the probability that it will fall below last week’s low before reaching 1.25. The bulls have stopped buying aggressively. If they become disappointed, they will take profits. That would lead to a swing down.
The past 2 days have reversed down. But they came after 3 bull days, and the 2 bear days are not particularly strong. They are more likely a pullback from the 3-day rally, than the start of a 3-week selloff.
However, with the EURUSD reversing every few days in a tight trading range for several weeks, there is no sense of urgency. Traders think that the price is about right. They have been buying selloffs and selling rallies, betting on reversals.
Everyone is waiting for a strong breakout up or down. There is no sign that one is about to begin. But Forex markets often reverse at the start of a year. That increases the chance of a swing down starting soon.
Also, the rally from the November low is a bull channel. Since most bull channels have bear breakouts, there should be a bear breakout at some point. It probably will come before the EURUSD reaches 1.25.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market fell below yesterday’s low, but then reversed up. In fact, there have been several reversals overnight. Day traders have been scalping for 10 to 20 pips.
What is left for the day is the decision about how the day and week will close. The bulls want bull bodies on the candlesticks on the daily and weekly charts. They will buy near the low of the week and the low of the session. So far, they are not buying relentlessly enough to create a bull trend.
The bears want bear bodies on both the daily and weekly charts. They have a better chance on the daily chart, but after reversing up twice overnight from below yesterday’s low, today has probably put in the low. The bulls have a better chance of a swing up, than the bears have of a swing down. If today has a bull body on the daily chart, today will be a good High 1 buy signal bar.
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
The Emini gapped above yesterday’s high, but the gap was small and it closed in the 1st hour. After a 3 hour trading range, there was a sharp selloff to the 60-minute EMA and then a strong reversal up. The day and week closed on the high. Traders expect higher prices next week, and next week might gap up.
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.
