Emini and Forex Trading Update:
Wednesday May 8, 2019
I will update again at the end of the day.
Pre-Open market analysis
I have been saying for several weeks that the Emini probably had to pull back below the March 21 high. This is because the Emini pulled back below breakout points several times this year. That is the most recent breakout point and therefore a magnet. Yesterday dipped below the target and reversed up sharply at the end of the day.
If there is strong follow-through buying today, traders will suspect that the bull trend is resuming. More likely, the selloff has been strong enough to generate confusion. When there is confusion, traders are quick to take profits. Consequently, the Emini might have to go sideways to a little more down before the bulls will get their new all-time high.
The gap above the March 29 high is another magnet just below, as is the March 25 higher low. Will this selloff last more than a few weeks? It might. An extreme buy climax often has a surprisingly deep pullback.
However, even if the bears retrace half of the 2019 rally, the bulls will buy a reversal up. They are confident that the Emini will soon break above the September/May double top at the all-time high.
Overnight Emini Globex trading
The Emini is down 13 points in the Globex session. But, yesterday’s reversal up was surprisingly strong. Consequently, there will probably be at least a small 2nd leg sideways to up today.
Today and tomorrow will probably be trading range days after a sell climax down to major support and ahead of Thursday night’s announcement on China tariffs. But, even though a leg up and a leg down are likely, the range will probably be big enough for swing trading.
Day traders will look for swings that last 2 – 3 hours. They then will look for reversal patterns like wedges tops and bottoms, and double tops and bottoms. If legs are strong, they will wait for 2nd signals, like micro double tops and bottoms.
EURUSD Forex market trading strategies
The EURUSD daily Forex chart has been sideways for 5 days in a tight trading range. This is a small triangle and the chart is therefore in breakout mode. It is as likely to go up 100 pips as it is to go down 100 pips.
However, it is still in an 12 month bear channel. Consequently, as long as it continues to make lower highs, the odds will favor lower lows. The bulls need a strong break above the March 20 1.1448 major lower high before traders will conclude that the bear trend has ended.
At the moment, there is no credible bottom. The selloff is in search of support. That might come at a measured move down from the February 28/March 20 double top.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart has been in a 25 pip tight trading range overnight. Today so far is a small inside day at the apex of a 5 day triangle. Traders have been selling around the high of the prior day and buying around the low of the prior day for a week.
Since the range is getting very tight, there will probably be a breakout within a few days. When a there is a triangle breakout, there is a 50% chance that the 1st breakout will fail and reverse. In addition, there is a 50% chance that the successful breakout will be up or down.
The breakout will probably only go about 100 pips before pulling back. This is because the daily chart has been having pullbacks every few days and there is no sign that this is about to change.
Day traders will continue to scalp until there is a breakout on the 5 minute chart. Once it comes, day traders will only look for a small 30 – 50 pip swing because that has been the pattern for months.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
The Emini rallied in a weak bull channel for most of the day. A bull channel is a bear flag. The bears got a break below the bull trend line in a sharp selloff down to the open at the end of the day. There was mostly trading range price action today.
Trump is making an announcement tomorrow night about Chinese tariffs. That could lead to a big gap up or down on Friday.
Today was a bull doji bar on the daily chart, and the daily chart is in a bull trend. Today is therefore a weak buy signal bar for tomorrow. The bulls want the week to close above the open. This week would then be a buy signal bar on the weekly chart for next week.
However, the March 29 high is the bottom of a big gap up. It is therefore a magnet below. Also, the 5 day bear channel is tight. At the moment, the odds favor sideways to down trading for at least another week, even if the Emini bounces for a couple days.
See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.
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 Intraday Market Update page.
Wondering why you didn’t mark bar 28 as a buy signal since it closed at the high? I bought there and it looked like a winner at first then was at a loss, but my stop was wide enough and I waited till the bull trend resumed and got out with a profit.
Allow me to add a few things Al mentioned during the Webinar at this time. bar 28 was right after a 6 or 7 bar micro channel so the first reversal should fail and lead to a minor reversal. Also we had bar 18 which was a magnet and Al kept saying the odds are we were going to test this low. Most important was the selloff to 26 was so strong the odds favored at least a small second let. The problem with bar 26 is that it is forcing traders to sell low in a likely Trading Range so better to be able to use wide stop and scale in.
if you think about it, one could argue bar 28 is a small surprise bar and odds favor a 2nd leg up which we got two bars later.
Anyways hope this helps.
I agree. The odds favored at least a small 2nd leg down after the big reversal down. Since the day was a trading range day, the odds also favored a test below 18. The bears tried twice and failed. The bulls then tried the other way. Trading range days are very forgiving of traders who are patient and use wide stops, especially if they are able to scale in.
Just trying to understand, if that’s the case then why would 27 be a buy?
It was, but I did not mark it because I thought the odds of a swing up without the double bottom were too small.
27 is a buy I guess because the RRR is good enough for at least a scalp. at least RRR1:1, PRB 60%. worthy a scalp buy.