Emini and Forex Trading Update:
Wednesday December 4, 2019
I will update again at the end of the day.
Pre-Open market analysis
Yesterday opened with a big gap down and sold off on the open. It then rallied in a broad bull channel for the rest of the day. Yesterday is buy signal bar for today on the daily chart. The bulls are hoping that the 2 day selloff will be just a bear trap in a strong bull trend.
It is important to remember what I said throughout November. Traders needed to expect a 50 – 100 point, 1 – 2 week correction to begin by the end of November. This was because the buy climax on the daily and weekly charts was extreme. Well, it began on November 27. Yesterday’s low was 85.5 points below the high. This selloff therefore met my minimum goal.
It is also important to understand that the weekly chart had been in a 9 bar bull micro channel. That means that this pullback was likely to only last a week or two. It might have ended yesterday, but it probably has a little more sideways to down to go. Can the Emini fall 5 – 8%, like the other pullbacks in 2019? I think the weekly micro channel will result in a smaller pullback.
Because many bulls believe the pullback will be brief and the current pullback has been extreme, these bulls are eager to buy. If the Emini begins to reverse up strongly today or this week, everyone might buy in a panic. That could quickly end the selloff.
Overnight Emini Globex trading
The Emini is up 13 points in the Globex session. If today gaps up, yesterday would be a one day island bottom. Just like the 5 day island top was not a major sell signal, an island bottom is not a major buy signal.
The 2 day selloff was extreme. Many bears began to take profits yesterday after a surprising big selloff. Traders are deciding if the profit taking will be enough to resume the bull trend on the daily chart, or if the bears will take control again around 50% up, near Monday’s low.
Although yesterday reversed up on the 5 minute, the reversal was not surprisingly strong. That hesitation results in confusion. This adds to he confusion caused by the sharp drop on the daily chart after a strong 2 month rally.
Confusion typically takes time before the path becomes clear. Therefore, the Emini will probably soon go sideways for a few days. If it does, the 5 minute chart will have a lot of trading range price action.
Less likely, yesterday will be a one day bear flag and the bear trend will resume. Or, yesterday will be the start of a climactic reversal up, like what happened at the end of December last year.
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 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 rallied from a double bottom higher low major trend reversal on Monday. But the rally has stalled at the November 21 lower high for 2 days.
The bears want a double top bear flag and then a break below the 4 week trading range. A measured move down would result in another new low in the 2 year bear channel.
The 4 week trading range has both a double bottom and a double top. Traders are deciding on the direction of the breakout. Because the October rally was so strong, a 2nd leg up to 1.12 is more likely than a reversal down to below 1.09. But not much more likely. The EURUSD would not be going sideways if the bulls were clearly in control.
In a trading range, bulls take partial or full profits near the top and the bears begin to sell. At the bottom, the bears start to take profits and the bulls begin to buy. There is no evidence yet that this is changing. However, the odds still slightly favor the bulls over the next month or two.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market has been in a 30 pip range overnight. The bulls want a breakout above the November 21 high. Because the chart is in Breakout Mode, there is an increased chance of a strong trend up or down. But until there is a breakout, day traders will be quick to take profits. The result would then be a continuation of yesterday’s trading range.
The bulls also want the week to close near its high. This week would then be a credible buy signal bar for next week on the weekly chart.
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
The Emini gapped up and formed a one day island bottom after a 5 day island top. These are minor reversal patterns.
Last week was a bad sell signal bar on the weekly chart. Therefore traders bought below its low and scaled in lower. They were confident that the Emini would get back to at least 1 tick above last week’s low. They achieved their goal today. They were able to exit their 1st long at breakeven and they made a profit on their lower buy.
While yesterday and today rallied, both days had tails on top on the daily chart. In addition, both had a lot of trading range price action. This increases the chance for more tomorrow. Furthermore, it increases the chance of a few sideways days starting this week. The bulls need stronger rallies on the 5 minute chart before traders will conclude that the rally will continue straight up to 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.
