Emini and Forex Trading Update:
Tuesday February 11, 2020
I will update again at the end of the day.
Pre-Open market analysis
Yesterday traded below Friday’s low and then above Friday’s high. It was therefore an outside up day. The Emini then entered a tight trading range, as it usually does once it goes outside up. The bulls got trend resumption up and the Emini closed at a new all-time high. There is no top and traders expect higher prices.
But, it is important to understand that the Emini might be in a trading range on the daily chart that began with the start of 2020. The current rally would then be a bull leg in a trading range rather than a resumption of the bull trend.
If so, a bear leg will follow. A reversal down would probably test the January low within a month or two. If there is a reversal, traders will be back to wondering if it will lead to a 5 – 10% correction.
Overnight Emini Globex trading
The Emini is up 10 points in the Globex session. It might therefore gap above yesterday’s high.
Yesterday was a big day and the Emini might be in a trading range since Christmas. If it is, today will probably be a bad follow-through day for the bulls. That means a small day or even a bear day.
This is important. If there is no follow-through buying today, it would increase the chance that the 2 week rally is just a bull leg in a trading range that began around Christmas. But if today is another big bull day, it will make traders expect a measured move up based on the high of the January range.
The January selloff was strong enough to make a trading range slightly more likely. Consequently, today will probably not be another big bull day.
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.
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 daily chart of the EURUSD Forex market has been in a strong bear breakout for 7 days. It is just above the October low. That is the bottom of the 6 month trading range and of the 2 year bear trend.
The selling has been extreme and is it therefore climactic. Also, the EURUSD is near support. That typically will attract some profit-taking. Consequently, there will probably be a 2 – 3 day bounce starting this week.
However, when a selloff is surprisingly strong like this, there is usually at least a small 2nd leg sideways to down. Therefore the 1st reversal up will likely not last more than a week or two. Traders will want to see at least a micro double bottom before they look for a 2 – 4 week reversal up.
It is important to remember what I have been saying for many months. There is a gap on the daily and weekly charts above the April 7, 2017 high of 1.0777. Since most gaps fill, this 2 year bear trend might not end until it closes that gap.
There is one other important point. Whether or not the sell continues down to below 1.08, every new low for 2 years reversed up for a few weeks within a couple weeks after making a new low. Therefore the October low is important support.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market broke below 1.09 over the past hour. It is within 20 pips of the October low, which is support. Since the daily chart is in a sell climax that is now extreme, there will probably be a 2 – 3 day 100 pip bounce starting this week.
Day traders will start to look for a reversal up on the 5 minute and 60 minute charts to trade that bounce. Also, because the EURUSD is overdone and near support, the bears will probably begin to take profits this week.
Can today break strongly below the October low and be another big bear trend day? Yes, but sideways to up is more likely. If it does, the bears will probably begin to take profits tomorrow.
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.
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 up and rallied, but the bad buy signal bar on the 3rd bar limited the upside. The day reversed down from the top of the wedge bull channel on the daily chart and closed near the low. It is a sell signal bar for tomorrow.
The bears believe that the 2 week rally was just a bull leg in a 6 week trading range. However, the bulls are hoping that the 6 month bull trend is resuming. Without some more bull bars this week, the odds are that the Emini will test the January low within a couple months.
Will tomorrow be a big bear day? That would increase the chances for the bear. Because the daily chart has probably been in a trading range since Christmas, it is more likely that nothing will be as clear as traders want. Traders expect continued confusion. The bears therefore might need a micro double top before they can begin a selloff to the January low.
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.
We have entered into interesting times in the market , thank you for your insight on this mornings market. You have added much to think about as the months go forward .. best to you Mr Brooks