Emini and Forex Trading Update:
Thursday November 5, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini had another big rally again yesterday. But, like each of the prior 4 days, it closed in the middle of the day’s range.
Many bulls are exhausted and have huge profits, and they started to lighten up midday yesterday. While the trend is strongly up, they might take more profits today or tomorrow. That increases the chance of a day or two of sideways to down trading.
However, traders will buy the pullback. I mentioned Tuesday morning in the chatroom that the early rally was exceptionally big, and it was therefore a Major Bull Surprise on the 5 minute chart. I said that a major surprise usually is the start of a move that could last at least a few more days. Yesterday was an example of strong follow-through buying.
Can today be a 3rd consecutive big bull day? Probably not. As I said, the bulls will start to take some profits. If today rallies early, it should either stall or reverse.
Can it be a big bear day? If the profit-taking is aggressive, yes. The rally has been extreme, and that increases the chance of a big down day. The bulls would love to see one! The will buy the 1st 1 to 2-day pullback, and they want to buy as low as possible.
Overnight Emini Globex trading
The Emini is up 61 points in the Globex session. It will therefore gap far above yesterday’s close and possibly above yesterday’s high. If there is a small gap up on the daily chart, it will probably close in the 1st hour.
Big gap openings usually result in trading range price action for the 1st couple hours. The bulls will look to buy a double bottom or wedge bull flag near the EMA. The bears will look to sell a rally to a double top or a wedge rally. An early trading range reduces the chance of a trend that lasts all day.
Because of the extreme rally this week, the bulls have big profits. Furthermore, their protective stops are far below. That increases their risk. The easiest way to reduce risk is to take some profits. That reduces the chance of a relentless bull trend today, and it increases the chance of a swing down. The profit taking could last many hours or even all day.
Also, there is an FOMC announcement today at 11 am PST. It could lead to a surprisingly big move in either direction, or a strong move and then a reversal. There is usually a sharp move up and down within the 1st few minutes. Consequently, day traders should exit positions ahead of the report and wait about 10 minutes before resuming day trading.
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 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 reversed up strongly from a failed breakout below the bottom of the 4-month trading range. The bulls see this as a double bottom bull flag. Remember, I keep saying that reversals in a trading range are more likely than a successful breakout. This is another example.
The 2-day rally has been very strong. It should attract profit-taking today or tomorrow. That could lead to a 50 to 100-pip pullback. However, because the rally has been exceptional, there are many traders who are eager to buy a selloff. This should result in at least a small 2nd leg sideways to up.
The bulls want a strong breakout above the October 21 lower high and especially above the September 1 top of the 4-month range. If they get 2 closes above the range, traders will look for a test of the next resistance. That is the February 2018 high, above 1.25.
Can the EURUSD abruptly reverse down to below yesterday’s low. Probably not. There should be at least a small 2nd leg up.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market has rallied in a strong bull trend overnight. Because the rally has been parabolic and the day’s range is huge, many bulls will start to take profits. This should result in a 30 to 50-pip pullback within the next couple hours.
Once there is a 30 to 50-pip pullback, traders will expect the bull trend to transition into a trading range. At that point, some day traders will also sell rallies. But even after it evolves into a trading range, day traders will still prefer to buy pullbacks over selling rallies for the 1st couple hours.
There is an FOMC announcement at 11 am PST today. That can lead to a big move up or down in any financial market. Day traders should exit positions ahead of the report and wait at least 10 minutes before resuming trading.
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 gapped up and rallied on the open, but reversed down from a parabolic wedge at the trend line from the September to October highs. After reversing up from a double bottom above yesterday’s high, the Emini stalled again at the bear trend line.
Today was an FOMC day the the Emini barely reacted. Despite swings up and down, most of the day was spent in trading ranges.
The past 5 days all closed in the middle of their ranges. The 2nd half of the day was a Spike and Channel Bull Trend. At the end of the day, the Emini sold off to the middle of the day’s range and became the 6th consecutive day to close in the middle.
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.
