Emini and Forex Trading Update:
Monday November 9, 2020
I will update again at the end of the day.
Pre-Open market analysis
A couple hours before the open today, an announcement on Pfizer vaccine being 90% effective was made. The Emini raced up 4% to a new high.
Will the rally reach 3884.00, the measured move up from the September 24/October 30 double bottom? It might. Traders want today to be a bull day closing near its high.
Tomorrow is the follow-through day. At a minimum, they want it to close above the open. That combination would increase the chance of higher prices over the next week. What happens at that point will determine if the rally continues.
Traders assume that any breakout, no matter how strong, has a 40 – 50% chance of failing. If today and tomorrow are big bear days, the odds would go up to 60%.
As a general rule, a big gap has an increased chance of leading to a trend day. If there is a trend, it will more likely be in the direction of the gap (up, in this case).
Huge gaps like this mean that the market has already gone a long way before the market opened. That reduces the chance of the day session becoming a huge bull day. If today is going to be a bull trend day, it will more likely be a smaller bull day. Many traders who are long will see this as a great opportunity to take some windfall profits. The bulls who are not long will want to buy a pullback and will be less willing to buy immediately after such a huge move up. Also, some bears will bet on at least a small pullback and they will begin to scale into shorts.
Overnight Emini Globex trading
The Emini is up more than 4% in the Globex session. Today will therefore gap far above Friday’s high and the all-time September high.
For daytraders, today will open far above the 20-bar EMA on the 5-minute chart. Many bulls do not like to buy too far above the average price. That reduces the chance of a strong bull trend day that begins on the open. More often, the Emini will go sideways or even down for a couple hours until it gets closer to the average price. At that point, the bulls will look to buy a double bottom or a wedge bottom.
If there is a trading range open, the bears will look to sell a double top or wedge rally. They then will expect to take profits around the EMA.
The bears would prefer a Bear Trend From The Open, and not just a selloff that leads to a trading range. If the Emini on the open forms a series of big bear bars closing near their lows, that will increase the chance of today being a bear trend day.
But as I said, an early trading range is what is most likely. Therefore, if there is an early selloff, it will probably be weak and soon evolve into a trading range.
Friday’s setups
Here are several reasonable stop entry setups from Friday. 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 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 trading range for 4 months. It has had many strong legs up and down. Trading ranges resist breaking out and therefore traders continue to bet on reversals until there are consecutive closes above or below the range.
The 5-day rally has been strong. Traders will probably buy the 1st 1 to 3-day pullback. So far, today is a doji day after Friday’s small break above the September 21 high. This is not a strong breakout. Today could be the start of a brief pullback. But, as I said, the bulls will probably buy it.
The bears want today to close near its low. They would then see the 5-day rally as the final leg of an expanding triangle. They want a reversal down. There would also be a double top with the September 21 high.
However, legs in trading ranges test nearby resistance. It is therefore more likely that the EURUSD will have to test the September 10 lower high before the bears can begin a 2 to 3-week swing down to the bottom of the range.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market has been sideways in a small trading range overnight. Traders are scalping reversals up or down. If there is a series of big trend bars up or down, day traders will switch to swing trading.
There is room to the September 10 lower high, which is a magnet above. Since it is only 10 pips above the overnight high, the EURUSD could easily break above it today. The bulls want today to close far above that resistance today and on the day’s high. That would increase the chance of a break above the September high.
However, with Friday stalling at the top of the 7-week range and with today so far being a small day, today will probably continue to be small.
The fight will be over the close. If today closes near its high, traders will expect higher prices tomorrow. If today closes near its low, traders will see today as a sell signal bar for at least a 1 – 3-day pullback.
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 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 had a huge gap up to a new all-time high today on the daily and weekly charts. It them sold off. After a weak rally, the bears got trend resumption back down to below the September high, which was the all-time high until today.
When a gap is especially big like this, it will attract some profit-taking. This often results in a few sideways days before traders decide if the trend will continue or reverse.
Tomorrow will be important. If is it a 2nd big bear day, traders will expect lower prices. However, if tomorrow is a bull day, it will undo today’s damage. Traders will then look for at least slightly higher prices.
A gap down on any day this week would create an island top. That would probably result in at least slightly lower prices. At a minimum, the bears want to close the gap above last week’s high.
Vaccine math
Pfizer today reported that it’s Covid vaccine is “90% effective.” But what does that mean? They have a phase 3 trial going on with about 44,000 participants. Half received 2 doses of placebo and half got the vaccine. Of the total patients, 94 so far came down with Covid. Their wording is unclear. They said that “fewer than 9” of the Covid cases were in the vaccine group. That means more than 85 were in the placebo group.
If the vaccine was totally useless, about 85 of the vaccinated patients should then have gotten Covid as well. Instead, fewer than 9 got infected. There were therefore about 75 fewer than expected, which means the vaccine then prevented 75 of the expected 85 infections. This is about 88% effective and not 90%. Maybe they just rounded up. Or, because the wording in the report is ambiguous and they are reporting 90%, it is probably actually 90%.
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.
Would the 9/16, 10/12, & 11/9 highs be considered a wedge on the daily Globex chart?
Any time there is a channel with 3 legs in one direction, computers will start to see it as a wedge. The better the shape, the more computers will trade it, and the more likely there will be a reversal. So, yes, that is a wedge, but the Sept. 16 high is relatively minor compared to the Sept. 2 and Oct. 12 highs. The computers probably see other factors as more important at the moment.
One is the strength of the 2-week rally. Another is a break above a 4-month trading range and a possible measured move up.
The 90% claim of Pfizer vaccine was done based on the first 94 people out of a total of 40000, which is statistically insignificant… could this have this effect on the market?
Yes. The market wants to go up based on technicals, so any news is a good excuse for fundamental traders.
Well, here’s my 2 cents…to me “fewer than 9” mean 8. If you use 8, then you come up with 90.7%. just sayin…