Emini and Forex Trading Update:
Friday January 24, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini triggered a sell signal on the daily chart yesterday by trading below Wednesday’s low. However, after an early selloff, it reversed up. It was a 1 day pullback in a bull trend and it is therefore a buy signal bar for today.
After 2 big bull bars on the weekly chart late in a bull trend, this week was likely to be a pause bar. On the weekend, I said that the week might have a small range or close near the open and form a doji bar on the weekly chart. Since the Emini is near the week’s open, the open might be a magnet all day today, especially in the last hour. That increases the chance of more trading range trading today, despite yesterday’s strong reversal up.
Overnight Emini Globex trading
The Emini is up 6 points in the Globex session. It might gap above yesterday’s high, which would trigger the High 1 bull flag buy signal on the daily chart.
The bulls want a weekly close at a new all-time high. But even if they get it, this week will still have a small range. That would qualify as a pause bar on the weekly chart, which was likely this week. However, a bull body would increase the chance of a bigger week up next week.
Yesterday was a buy signal in a strong bull trend and the signal will probably trigger today. That increases the chance of a bull trend day today. But the past 4 days had relatively small ranges. In addition, each had at least one swing up and down. Finally, they were sideways and today is now at the top of this range. These factors make a big bull trend day unlikely today.
Can today be a big bear day. Probably not. Yesterday was the entry bar for a sell signal on the daily chart. Because it was a strong bull day, the bears will probably not be able to regain control today. Day traders expect today to be sideways to up, but not strongly up.
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 daily chart of the EURUSD Forex market broke below the neck line of the 2 month had and shoulders top yesterday. I said that many bulls would not buy until the selloff reversed up from below the support of the December 6 of November 29 lows. It broke below the December 6 low yesterday.
The November 29 low is just below the 1.10 Big Round Number, which has been important for 6 months. The EURUSD will probably get there within a week or two.
While yesterday’s bear breakout was not particularly big, it was enough to make traders expect at least slightly lower prices. January traded above December’s high and it is now near December’s low. With a week left in January, January might trade below December and become an outside down month.
That would be a sign of strong bears, but it is less important when if comes in a tight trading range. The month chart has been in a tight range for 6 months.
I have not talked about the measured move targets and the gap on the daily chart around 1.08, but they are now coming back into consideration. There is currently a 50% chance that the 2 year bear trend will get there before the bulls will get their reversal up.
Weak breakout below neck line of head and shoulders top
Today also broke below the December 6 low but bounced back up to that low over the last hour. It will probably be an important price today.
When the bears get a breakout, they have a higher probability of lower prices is they get a close below the breakout point. The chance of lower prices goes up if the close is far below the breakout point and if there are consecutive closes below the breakout point.
So far, this breakout lacks strength. That means that the month-long selloff still looks like a leg in a trading range or bear channel, just like all of the other legs up and down for the past 20 months.
Traders are not expecting an acceleration down from here into a strong bear trend. Instead, they are looking for a reversal.
There have been problems with each of the bottom attempts over the past 3 weeks. Until there is a strong buy signal bar or strong reversal up, traders will bet that the EURUSD will continue to drift lower. The next support is the 1.10 Big Round Number and the November 29 low.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market sold off 35 pips overnight and broke below yesterday’s low. Since yesterday had a prominent tail below and closed above the December 6 low, it was not a strong breakout. However, its body was big enough to be a surprise. A Bear Surprise Bar typically will have at least a small 2nd leg sideways to down.
The EURUSD has been in a 15 pip range for the past 4 hours. Day traders are looking for scalps. The bears want a close far below the December 6 low and the bulls want a strong reversal up. The lack of energy make both unlikely today. Instead, today will probably Oscillate around that low and then close a little above or below it.
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 down from above yesterday’s high to below its low. Today is therefore a big outside down day. It is a sell signal bar for next week. However, there is a 40% chance of a bull buy signal bar on Monday.
The weekly chart closed near its low and last week is a sell signal bar for this week. If there is follow-through selling on Monday, traders will conclude that the 5% correction has begun.
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.
