Emini and Forex Trading Update:
Monday December 2, 2019
I will update again at the end of the day.
Pre-Open market analysis
Friday closed early, but it closed below the open and the midpoint of the range. It was a bear bar on the daily chart and a reversal down from the top of the 2 month trading range.
Traders do not yet know if the pullback will last only 1 – 3 days, like all of the other pullbacks for 2 months. With the daily chart in a buy climax, the pullback might instead last a couple weeks. If so, a reasonable target is the start of the bull channel. That is either the October 18 or October 31 low.
I have been saying that the Emini was probably going to begin a 2 week, 50 – 100 pullback by the end of November. If this is not the start, it will probably begin within a couple weeks.
A buy climax typically attracts profit takers. But the bull trend is so strong that the bulls will buy the pullback. Therefore, the best the bears can probably get is a 2 – 3 week pullback. They will likely need a double top before they can get a 5% correction.
Overnight Emini Globex trading
The Emini rallied overnight and then reversed down. It is currently unchanged. Traders know that many bulls will be quick to take profits in the extended buy climax on the daily chart. There is therefore a higher probability of one or more bear trend days this week.
Furthermore, many bulls will take profits above any recent high. Traders should expect a 50 – 100 point pullback to begin this week. Even though the Emini has had many bull days over the past several weeks, profit taking will probably begin to create some bear days. That reduces the chance of a continued strong bull trend this week.
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. 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 is in the middle of a 4 month trading range and in a 2 year bear channel. It has been sideways for 6 days.
Traders are deciding if there will be a reversal up from here for a 2nd leg up from the nested wedge bottom if October 1. They expect a 2nd leg up after the October rally, which was the strongest rally on the weekly chart (see weekend update) in the 2 year bear trend. Last week is a buy signal bar on the weekly chart. Since it is only a doji bar, it will not attract a lot of buyers above its high.
There should be a test of the 12 month bear trend line and of the October high. Both are around 1.20. That is the minimum target over the next 2 months.
However, the chart has been sideways for 4 months. The EURUSD is equally likely to first test the bottom of the trading range as it is to test the top.
Bulls will buy new low in 2 year bear channel
Even if it falls below the October low, the bulls will buy it. They have bought every reversal up new low for 2 years and it has been a profitable strategy. They will continue to do it until it no longer works.
Can the bears get a strong break below the October low? Probably not. There are measured move targets and a gap down around 1.08. No one yet knows if that support will be tested.
But traders do know that a break below a bear channel only has a 25% chance of leading to a stronger bear trend. The bears are more likely to take profits at a new low than to sell aggressively below the October low.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market had a small reversal up over the past hour. It is now testing Friday’s high and last week’s high. Last week is a weak buy signal bar on the weekly chart.
The bull hope that the 3 week micro double bottom on the weekly chart will be a strong enough base for a 2 – 4 week rally to the October high. Since there has not been a strong bull bar in over 2 weeks on the daily chart, it is probably not enough. Most bulls will therefore wait either for a strong buy signal bar on the daily chart or for a strong bull breakout.
Even though traders expect a rally to 1 – 2 to begin soon, there is not yet a strong buy setup on the daily or weekly charts. Bulls are still willing to buy if there is a Bull Surprise Bar on either chart. A good buy signal bar is a more common start to a trend. Consequently, any rally this week will probably just be part of he 3 week trading range and not the start of a move up to 1.12.
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 sold off strongly on the open. The November high might be the start of a 2 week, 50 – 100 point pullback.
Today’s selloff was a Bear Surprise Bar on the daily chart. Traders should expect a 2nd leg down, even if there is a bounce over the next week. Every strong bear bar for 2 months had bad follow-through. Therefore, there is an increased chance of a bull bar tomorrow. But the odds favor at least a small 2nd leg down within a couple weeks.
This week is now the 1st pullback in a 9 week bull micro channel on the weekly chart. The bulls have been willing to buy above the low of the prior week for 2 months. They now finally have a chance to buy a pullback. Many will take it. Consequently, the pullback will probably not last long nor fall far.
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.
