Emini and Forex Trading Update:
Wednesday September 23, 2020
I will update again at the end of the day.
Pre-Open market analysis
On the open yesterday, the Emini triggered a buy signal on the daily chart by going above Monday’s high. I said that the Emini was likely to rally for a few days this week and this is the bear rally.
However, because of the streak of 9 consecutive bull days on the daily chart, the Emini will still probably trade below the bottom of that streak before making a new high. That low of 3184.75 came on July 30. Consequently, traders are planning to sell this rally, but are waiting for a credible sell signal bar.
How much higher can the Emini go? The next target is the 50-day MA at around 3334. That was failed support and it is therefore a now a magnet. The Emini should get there this week and maybe today. The bulls hope that the Emini will break strongly above it, which would be a sign that the bull trend is resuming.
If the Emini breaks above the September 16 lower high, the odds that the rally will continue up to a new high will increase to about the same as for a 2nd leg down to 3000 – 3200.
September is an outside down bar on the monthly chart. But since the 5 month rally was strong, September will probably close above the August low of 3266.25. Therefore, there is not much downside risk over the remaining 6 trading days in September.
Overnight Emini Globex trading
The Emini is up 10 points in the Globex session. It might gap above yesterday’s high. If it does, the gap will be small. Small gaps typically close early in the session.
Since the 50-day MA was so important for the past couple of weeks when the Emini was above it, it is still important now that the Emini is below it. The Emini should get drawn to it this week. It is currently around 3334.
Unless the bulls get several more bull days, this is still probably a bear rally. However, rallies in bear trends can be strong. Consequently, traders should not be surprised if today becomes a strong bull day.
However, the 2-day rally has not been especially strong. It is more likely that many bulls will become disappointed. Disappointed bulls tend to take profits and wait for a pullback to buy. Also, bears tend to sell weak rallies. Therefore, there is an increased chance of trading range price action today.
As I said, the Emini will probably finish the month above the August low of 3266.25. The Emini might go begin to form a trading range for the remainder of the month between the Augusts low and the 50-day MA.
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 broke below the bottom of the 8-week trading range today. So far, the breakout has been small and the EURUSD is holding around the bottom of the range.
On the monthly chart (not shown), September traded above the August high and then below its low. September is now an outside down month. That is bearish, especially when it comes in a buy climax at resistance. It increases the chance of at least slightly lower prices in October. The outside down candlestick will be more bearish if September closes below the August low.
However, most trading range breakouts fail. There were several breakouts above the top of the range that reversed down.
Since the bull trend was so strong on the monthly chart, September will probably close back above the August low. That means the EURUSD will probably be above the bottom of the trading range next week when September ends. Therefore, this bear breakout will likely not fall much lower in the next few days. Traders expect that the EURUSD will turn up, at least slightly, within a day or two for the remainder of the month.
What happens if today closes far below the August low and tomorrow is also a big bear day? Traders will conclude that the breakout is successful and that the selloff will continue down for a measured move. The 1st downside target is the June 10 high. That was the breakout point for the July bull breakout.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market fell below the bottom of the 8-week trading range overnight. However, the breakout was small and the EURUSD bounced. It has been sideways in a small trading range around the August 3 low for the entire overnight session.
The bears want today to close far below the August low and on the low of the day. That is unlikely, given how the breakout has been small and most breakout attempts fail. At a minimum, they want today to close at least 1 pip below the August 3 low. If they then get a 2nd close below the range tomorrow, traders will assume that a successful breakout has begun. The bears will sell rallies today as long as today remains a trading range day, as they try to get the bulls to give up.
The bulls always want the opposite. They hope today is a failed breakout. They hope this is the start of a swing up to the top of the range. They will buy reversals up from the August 3 low and try to create a strong buy signal bar on the daily chart.
The odds of a reversal up will be greater if today is a bull day closing on its high and with a big body on the daily chart. At a minimum, they want today to close at or above the August low. They would prefer that it closes above the open so that today’s candlestick would have a bull body. That would make it a better buy signal bar for tomorrow. Traders would then be more willing to buy tomorrow above today’s high.
What is most likely? Today will probably remain a small trading range day and close a little above or below the August low. However, because the EURUSD is at such an important price, there is an increased chance of a big trend today 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 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 reversed down from above yesterday’s high and sold off to far below yesterday’s low. Today was therefore an outside down day and it is a sell signal bar for tomorrow on the daily chart.
The Emini accelerated down in the middle of the day and fell back below the August low and the open of the week. It closed at 3231.25. I have been saying for a month that a minimum target is 3200. It is a Big Round Number, which is a psychological magnet. The Emini is also near the July 30 bottom of a 9 day bull streak, the close of last year, and the June 5 high breakout point.
Because today’s selloff was so extreme, tomorrow will probably have at least a could hours of sideways to up trading that starts by the end of the 2nd hour. The Emini could even bounce for a few days. However, traders still think it will trade down to 3000 – 3200 before the bulls can make a new high.
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.
Hi Al, on the daily chart would you consider the pattern forming to possibly be a spike and channel? Perhaps opening the door for only very small pullbacks until the lower target(s) are reached. Thanks.
Hi Al, can you help me explain why buying above 15 or 16 was a bad buy. I saw it as wedge down. Thank you.
At that point, I mentioned in the chatroom that today could be a bear channel day where the bears sell whenever the Emini is near the EMA. That lowered the probability for the bulls, as did the tight bear channel. So did the conspicuous tail on top of the bar.
I said the probability would be higher if a trader waited for a consecutive bull bar closing on its high and far above the EMA.