Emini and Forex Trading Update:
Thursday April 18, 2019
I will update again at the end of the day.
Pre-Open market analysis
The Emini yesterday traded above Tuesday’s high and then below its low. Yesterday was therefore an outside down day. There is also an 8 bar wedge rally on the daily chart.
Because yesterday was an outside down day in a buy climax, it is a sell signal bar for today. However, the bull channel on the daily chart is tight. That reduces the chance of a sharp selloff. Instead, the Emini might go sideways for a few days before going down.
The day after a big outside day is often an inside day. If today stays inside of yesterday’s range and has a bull body, it will be a buy signal bar for Monday. The Emini is closed tomorrow for Good Friday.
In addition, the 60 minute chart has been in a small pullback bull trend for about 100 bars. That is a long time and therefore unsustainable and climactic.
A tight bull channel typically converts into a trading range. A reasonable target for a pullback would be the April 9 low, which is also a test of the March 21 high. Consequently, traders should look for about a 50 point pullback over the next week. The next targets are the March 21 high and the April 1 gap.
Attorney General Barr is releasing the Mueller report today at 6:30 a.m. PST. He is releasing the Mueller report around 8 am PST. That could be the catalyst for a selloff over the next week or two.
Today is the last trading day of the week
Since today is the last trading day of the week, its close is important. If the week closes below the open, there will be a bear bar on the weekly chart.
It would be the 3rd sell signal bar in 8 weeks and therefore there would be a wedge top. However, the weekly chart is in a strong bull trend. As a result, if the sell triggers next week, the selloff will probably be minor.
Overnight Emini Globex trading
The Emini reversed up from a selloff in the Globex session. It is now 5 points above yesterday’s close. Since it will probably open within yesterday’s range, there is an increased chance of an inside day. If there is going to be one and the day opens near the low, traders will look for an early low of the day.
Attorney General Barr speaks at 6:30 am PST today and he will release the Mueller report around 8 am PST today. Either could lead to a strong move up or down. The bulls want a break above yesterday’s high and then a test of the all-time high. But, there is a buy climax on the daily and weekly charts. That lowers the chance of a big rally today.
Because yesterday was a possible top in a sell climax, there is an increased chance of a big bear day after the Mueller report this morning. The bears want to trigger a sell signal by having the Emini break below yesterday’s low. There is an increased chance of a big bear trend today.
Trading range days are always more common. Consequently, even though there is a catalyst and an increased chance of a trend, the odds still favor at least one swing up and down.
Bear channel is a bull flag
Yesterday was a bear channel. A bear channel is a bull flag. That means that today will probably break above yesterday’s bear trend line. A channel typically converts into a trading range.
While there will probably be a big move up or down on the report early today, the odds still favor a lot of sideways trading today. The open of the week could be a magnet all day.
Today is the last trading day of the week. If the bears close the week below the open, this week will be a sell signal bar for next week on the weekly chart. But, it the bulls close the week above the open, the 4 month rally will probably continue up to test the all-time high over the next several weeks.
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. Buyers of the Brooks Trading Course 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 EURUSD daily Forex chart rallied for 2 weeks in a weak bull channel after a strong selloff in late March. A bull channel is a bear flag. The bears broke below the bull channel overnight.
But, they have not yet broken below the 5 month trading range. Traders want to see consecutive closes below the bottom of the range before they will conclude that the trading range has converted into a trend.
Until then, they will buy every selloff, sell every rally, and take quick profits. This is because they are correctly betting that reversals are more common than breakouts when there is a trading range.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart sold off strongly on the start of the European session. Since then the 5 minute chart hast been in a 20 pip trading range.
Everyone sees the break below the 2 week bull trend line. Everyone knew that the bull channel was likely to have a bear breakout. Therefore, this selloff is a test of the April low. What traders want to see is either a strong break below or a strong reversal up.
Because reversals are more common than breakouts when there is a trading range, traders expect a reversal up from somewhere around the April low. While it could come today, that is unlikely. The overnight momentum was strong enough to make at least a small 2nd leg down likely. Consequently, traders will look to sell rallies.
But, since the chart has been in a tight range for 5 hours, day traders will also look to buy reversals up for scalps. Since a 2nd led down over the next few days is likely, it will probably be easier to make money selling rallies.
Finally, there has been very little movement in the US session over the past several weeks. The big moves have been coming in the European session. As a result, US day traders expect to scalp, even after a big selloff, like this one. However, Attorney General Barr’s announcement at 6:30 am PST or the release of the Mueller report around 8 am PST could lead to a strong move up or down 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 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
Most days over the past 3 weeks sold off and then reversed up. Today was another example. What is different now is yesterday’s selloff. It was strong enough to have a 2nd leg down early next week. Despite today’s strong rally, the bears will look for a lower high major trend reversal on the 60 minute chart next week. If they get a good sell signal bar, they will expect about a 50 point selloff from Wednesday’s high.
The bulls are hoping that today’s reversal up will have follow-through on Monday. They want the 4 week rally to reach the old high without a deeper pullback.
Today is a buy signal bar for Monday. Since it was a doji bar and yesterday was a bear bar on the daily chart, it is a weak buy setup. There might be more sellers than buyers on Monday above today’s 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 Intraday Market Update page.
