Emini and Forex Trading Update:
Monday January 13, 2020
I will update again at the end of the day.
Pre-Open market analysis
Friday was an outside down day on the daily chart. Since it came from the 3rd leg up over the past 2 weeks, the bears are hoping for at least a couple legs down over the next couple weeks.
However, the 3 month rally has been in a tight bull channel. That is a strong bull trend. Traders will bet that every top will fail until one clearly succeeds. Therefore, they view Friday as a pullback in a bull trend instead of the start of a reversal into a bear trend.
Everyone knows that the daily, weekly, and monthly charts are overbought. But buy climaxes often last longer than what seems likely. The bears will probably need at least a double top on the daily chart before they can begin a 2 – 3 week leg down. Alternatively, if there is a big Bear Surprise Bar or 2 – 3 medium size bear bars closing on their lows, traders will look for a 2 – 3 week pullback. Without some sign of strong bears, traders will continue to bet that every reversal will fail within 2 – 3 days.
Overnight Emini Globex trading
The Emini is up 11 points in the Globex session. There will therefore probably be a big gap up.
A big gap usually means that the Emini is far above its average price. Many traders prefer to buy closer to the average price. Once measure of average is the 20 bar EMA. Consequently, a big gap up usually leads to an hour or two of trading range price action.
Once the Emini gets closer to the EMA, the bulls look for a double bottom or wedge bottom. When the Emini is in that trading range, the bears will try to create a double top or wedge and then a swing down.
Friday’s selloff over the final 3 hours was in a tight bear channel. When that happens, the Emini typically converts into a trading range before it can enter a bull trend. That is an additional reason to expect a Trading Range Open.
Most days over the past couple weeks have been big and have had swings up and down. Therefore, even if today is a trading range day, the range will probably be big enough for at least one swing up and one swing down.
Friday’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. 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 has sold off in a wedge bear channel for 2 weeks. But the channel is tight and Friday was not a strong buy signal bar.
A reversal up from a tight bear channel is usually minor. Also, the December 6 and 20 lows are magnets below. Consequently, the EURUSD will probably continue at least a little lower, even if it bounces for a few days here. The bulls will then try to create a double bottom with one of those lows.
Since the chart has been in a trading range for 6 months, traders expect reversals. Most have come after 2 – 3 weeks. This selloff has lasted a couple weeks. Traders will expect a 1 – 2 week bounce to begin this week or next week. If there is a good buy signal bar and a double bottom, they will look for a 2 – 3 week leg up. There is no sign that the 6 month trading range is about to end.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market traded above Friday’s high. That triggered the wedge bull flag buy signal on the daily chart.
But since the setup was weak, there were more sellers than buyers above Friday’s high. The EURUSD immediately reversed down after triggering the daily buy signal.
However, the reversal was weak. The overnight range has only been 25 pips. That means that traders are looking for reversals and 10 pip scalps, as they have been for 3 days. They will continue to scalp until there is a big breakout up or down on the 5 minute chart. The lack of energy overnight makes that unlikely for today.
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
After a trading range open, the Emini rallied in a Small Pullback Bull Trend. But it stalled at Friday’s all-time high and entered a tight trading range. There was some bull trend resumption in the final hour. This increases the chance of a gap up tomorrow.
Despite the buy climax on the daily chart, there is no clear top yet. Traders keep buying every 1 – 3 day pullback. But since the buy climax has gone on for a long time, traders expect a 2 – 3 week pullback to begin at any time. The bears usually need at least a small double top before they can get their leg down. Until then, the odds still favor at least slightly higher prices.
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.
