Emini and Forex Trading Update:
Wednesday May 20, 2020
I will update again at the end of the day.
Pre-Open market analysis
Yesterday was bear day on the daily chart after Monday’s strong rally. It is therefore a sell signal bar for a failed breakout above the month-long trading range.
However, Monday’s rally was strong and it triggered buy signals on the daily and monthly chart. In addition, the March 3 lower high and the 200 day moving average are important magnets above. A measured move up based on the month-long trading range is almost exactly at the March 3 high.
It is therefore more likely that yesterday is just part of a 2 – 5 day pause after breaking above major resistance. Traders still expect a test of the 200 day moving average and the March 3 lower high within the next couple of weeks. At that point, they will look for about a 10% pullback for a few weeks.
But if today is a surprisingly big bear day or if there are several consecutive bear days, traders will conclude that the break above the April high has failed. They will then look for a selloff for several weeks to the bottom of the month-long trading range and possibly 2600.
Overnight Emini Globex trading
The Emini is up 37 points in the Globex session. It will therefore gap far above yesterday’s close and it will have undone much of the last selloff.
That selloff was a Bear Spike and Parabolic Wedge Bear Trend. Traders expect a test of the start of the channel. Then, there is typically a trading range. This is similar to the pattern on the daily chart.
Today will open around the start of the channel (the top of yesterday’s climactic final leg down). Consequently, there is an increased chance of an early trading range. This is especially true since it will open within yesterday’s trading range.
Traders believe that the breakout above the April high will be successful. That makes them look to buy strong selloffs,like yesterday. They are betting that the selloffs are more likely pullbacks in a bull trend on the daily chart than the start of a bear trend. That increases the size and number of rallies on the 5 minute chart.
Even though today will probably have a trading range open, the Emini is working up to 3100. There is therefore an increased chance of bull trend days.
But if the bears get a 2nd big bear day today, traders will begin to believe that the breakout above the month-long trading range will fail.
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. 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 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 rallied to the top of its 2 month trading range. Since it is still in the trading range, it is still in Breakout Mode.
The last time one side was in control was during the rally to the March 27 high. That makes a bull breakout slightly more likely than a bear breakout. But it is important to remember that until there is a breakout, there is no breakout and reversals are still more likely.
At a minimum, the bulls need a close above the May 1 high. If the close is far above and the breakout bar is big and it closes on its high, that will increase the chance of a successful breakout. Consecutive bull bars and consecutive closes above that high would make traders expect a test of the March 27 buy climax high or even the March 9 high.
But if there is a bear bar closing near its low this week, especially a big bear bar, traders will look for a move back to the bottom of the range.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market has had a small overnight rally with small bars. Also, the low was above yesterday’s low and the high so far is below yesterday’s high. Today is currently an inside bar.
Even though the EURUSD is up 30 pips, the range is small. Also, yesterday reversed down. This lack of energy at the top of the 2 month trading range reduces the chance that the 2 week rally is the start of a bull trend.
But because the chart is at important resistance, day traders will be ready for either a strong breakout or a strong reversal. Given the price action of the past 2 days, they expect quiet trading. Day traders have been scalping for 10 pips while they wait for the next strong move up or down.
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 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 rallied on the open, but reversed down from a Final Bull flag. The day became a trading range day.
Traders see today as a weak sell setup for a 2nd reversal down from above the April high. They expect a move up to the 200 day moving average and the March 3 high within a week or two. The bears would need a surprisingly strong reversal down tomorrow to put the odds of a swing down in their favor.
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.
