Emini and Forex Trading Update:
Friday December 6, 2019
I will update again at the end of the day.
Pre-Open market analysis
The Emini reversed down strongly yesterday from above Wednesday’s high. However, the bears were unable to break below Wednesday’s low to create an outside down day. Instead, the bulls got a reversal up and a rally that lasted the rest of the day.
I have been saying all week that last week’s low would be a magnet on Friday. Well, today is Friday. I said it because last week had a bull body. It was therefore a bad sell signal bar on the weekly chart, given a 9 week bull micro channel. That means there would probably be more buyers than sellers below.
This was true, despite the 2 day selloff. As a sign of strength, the bulls would try to get the week to close above last week’s low. They want a close above the entry price for the bears. Furthermore, they would like today to close above the open of the week, reversing the entire selloff.
The bears wanted a big bear bar closing on its low on the weekly chart. Now, they are desperate to simply get the week to close even slightly below last week’s low.
With last week’s low being important to both the bulls and the bears, it might be a magnet again today. This is especially true in the final hour of today. The other key price is the open of the week. The bulls want the week to close above the open.
Overnight Emini Globex trading
The Emini is up 20 points in the Globex session. It therefore might gap up again today. Furthermore, it is now only 6 points below the open of the week. That is close enough to be a magnet today.
The 4 day rally has reversed the 2 day selloff. A big gap up increases the chance of a trend day. If there is a trend, up is more likely than down.
However, The bulls might be satisfied with a close around the open or high of the week. If so, there might not be much of a rally today.
Their next objective would be to close the week above last week’s high. This week would then be an outside up week. But even if they achieved that, today would probably not close much above last week’s high. That high is only 18 points above the current Globex price. Therefore, if today is a bull trend day, it will probably not be a huge bull trend day.
Can today trend down? Last week’s low is still a magnet below. With the surprisingly strong rally over the past 30 minutes, and the Emini now getting close to the open of the week, a bear trend day is unlikely. Consequently, today will probably be sideways to up. With most days spending a lot of time going sideways, today likely will as well, even if there is a trend.
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 had a bull inside day yesterday in a swing up. Today triggered the High 1 bull flag buy signal by going above yesterday’s high.
But, it reversed down from only 2 pips above yesterday’s high. Also, it just broke below yesterday’s low after the US unemployment report. The buy signal is failing. That was likely since the EURUSD has been unable to successfully break above the November 21 high several times over the past 4 days. Today is now an outside down day.
The bears would like today to close below yesterday’s low and near the low of the day. Today would then be a reasonable sell signal bar for a double top with that high. However, will the bears get a reversal down from here or will the 4 day tight trading range continue? The odds are about the same for both.
Will the next week be up or down?
They odds are probably a little better for a test of 1.2 than a break below the October low over the next few weeks. This is because the October rally was strong enough to get a 2nd leg up, and there is good resistance there. Resistance is a magnet, and the EURUSD is close enough so that it probably cannot resist the magnetic pull. The magnets are the bear trend line, the October high, and the 1.12 Big Round Number.
The bears want a break below the November 29 low. That is the neck line of the double top and the bottom of the 4 week trading range. They then want a strong break below the October low. They would then have a new low in their 2 year bear channel.
But even if they achieved their goals, the bulls would buy the bear breakouts. This has been a profitable strategy for 2 years and they are confident that they would get a 200 – 300 pip rally, like they did after every prior new low.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market traded above yesterday’s high and it just broke below yesterday’s low. Today is therefore an outside down day.
However, it bounced up from below yesterday’s low and the bottom of the 4 day tight trading range.
The 2 reversals over the past hour increase the chance that today will remain a trading range day. Since the most recent reversal was down and the daily chart is at resistance, if there is a trend today, down is more likely.
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 rallied in a Small Pullback Bull trend. The rally stalled between the open of the week and the high of last week. At the end of the day, the Emini pulled back to the open of the week. This week is now a doji bar on the weekly chart.
The bulls have reversed Monday and Tuesday’s selloff and now traders are wondering if they will get a new high. The reversal up was strong this week and the daily, weekly, and monthly charts are in strong bull trends. However, the rally did not break above last week’s high. The bears therefore will try to create a double top.
The momentum up favors the bulls. The bears will probably need at least a few sideways days before they have a reasonable chance of a reversal down from a double top. Therefore, the next few days will probably be either sideways or up.
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, Yesterdays (Thursday) surprise bear bar 66 got me. My trade was long above the two bar reversal (49 & 50) for a test of the days high. I placed my stop below bar 49. Was that acceptable since it was the start of the BO or should I have placed it below the start of the leg at bar 40.
I wrestled with the choice before placing the trade.
Thanks for all you do!
I mentioned in the room yesterday that there was a nested wedge top and I thought bulls should get out below any bear bar or 4 tics below a bull bar. I said that 4 ticks below 63 was a reasonable exit or 65. My concern was the risk of a huge bear bar, which happened. If not then, then I think the 40 bottom of the rally was the next good choice. Below 49 was a skunk stop, in the middle. Skunks get killed in the middle of the road. Safer to exit earlier or farther below.
Great question Eric and thanks for the response Al. Finding entries is relatively easy, managing trades is the tricky part to pick up. This was informative.