Emini and Forex Trading Update:
Tuesday May 28, 2019
I will update again at the end of the day.
Pre-Open market analysis
The Emini sold off on Thursday and had a bear follow-through bar on Friday. The bears hope that the selloff will break below the May 13 low, which is the neck line of a head and shoulders top. March 21 formed the left shoulder.
Every head and shoulders top is also a triangle. It is therefore a Breakout Mode pattern. That means there is always both a buy and sell setup. For example, there is now a double bottom bull flag.
There is no breakout until there is a breakout. The bears have a credible start. Furthermore, a 2nd leg down from the 4 month buy climax is likely.
However, the Emini could continue its 2 week trading range for at least another week. This is especially true since last week was an inside bar on the weekly chart. In addition, it closed in its middle third. That increases the chance of this week being a 2nd consecutive inside bar. Consequently, there is an increased chance that the trading range price action will continue this week. Since the Emini is now at the bottom of the range, traders will expect a bounce for a few days.
Overnight Emini Globex trading
The Emini is up 1 point in the Globex session. Since it is at the bottom of a 4 week trading range, the odds favor a bounce over the next few days. Therefore, day traders will look for an early low this morning and then a swing up. Every day over the past week has had a reversal. Consequently, day traders will expect at least one today.
Last week formed an inside bar on the weekly chart. The past 4 weeks have all had reversals on the weekly chart. Therefore, traders will expect a reversal up from around last week’s low and a reversal down from around last week’s high.
There is trading range price action on the daily and weekly charts. That increases the chance of more trading range price action on the 5 minute chart.
Friday’s setups
Here are several reasonable stop entry setups from Friday. 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 reversed up last week from just below the April 26 52 week low. The reversal up was strong enough to have at least a small 2nd leg up. Furthermore, the reversal up was from the bottom of a 4 week trading range. In addition, the May rally was smaller than most of the prior bear rallies over the past year. Consequently, today is more likely a pullback from last week’s rally than a resumption of the bear trend. Therefore, traders should expect a test of the May 1/May 13 double top within a couple of weeks.
It is important to note that the chart has been in a bear channel for a year. Consequently, every 2 – 3 week rally will probably continue to reverse down to a new low.
Can yesterday be a small bear flag that leads to a new low this week? Yes, but a rally is more likely. This is especially true since the weekly chart had a good buy signal bar last week and yesterday triggered the buy signal by going above last week’s high.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart has been in a 25 pip range overnight. Yesterday was a sell signal bar on the daily chart for a 3 day bear flag. Today triggered the sell signal by going below yesterday’s low.
However, last week’s 2 day rally was stronger than this 2 day selloff. In addition, yesterday triggered a weekly buy signal. Traders believe that there will be more buyers than sellers below yesterday’s low.
If the bulls can close today above its open, it will be a buy signal bar for tomorrow. While today so far is small and day traders are scalping, swing traders will hold for a test of the May 13 high of 1.1264.
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
Today’s morning rally reversed down from below the 3 week bear trend line. It then sold off again for more than a measured move down from a double top bear flag. In addition, it broke below last week’s low. Today was a strong bear trend day.
Last week was an inside bar on the weekly chart. It is therefore a sell signal bar for this week. By today breaking below last week’s low, the Emini triggered the weekly sell signal.
However, last week’s candlestick had big tails above and below. It is therefore a weak sell signal bar. Consequently, there might be more buyers than sellers below last week’s low. The bulls will watch for a sharp reversal up tomorrow. Because today was a sell climax, there is a 75% chance of at least 2 hours of sideways to up trading tomorrow that starts by the end of the 2nd hour.
The bears hope that this is the start of a selloff from a head and shoulders top on the daily chart. They therefore want strong follow-through selling tomorrow. For example, if there is a big gap down and then a bear day, traders will look for a measured move down on the daily chart.
Because the Emini is testing major support, there is an increased chance of a big trend day up or down tomorrow.
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.
Hi Al, last night I re-watched video 52a, 52b and I noticed you mention two different strategies, one getting out early; the first sign of decent opposing pressure and another by relying on your stop. Today I Sold below 16. Stop above 11. Got out as 19 was forming. Should have I relied on my stop. I ended up selling again below 21. I feel I trade better by getting out early as I am more calm and objective. I guess what I’m really asking is, was the early stop above 18 and since I missed it should have I relied on my original stop and held through the bull leg. Thanks for all you do.
I think it is a matter of personality. Both are reasonable. Traders who prefer 1 – 3 swing trades a day rely on wide stops. Those looking for 5 – 10 trades and smaller profit per trade get out faster. I tend to get out of shorts above bull bars, especially if the context is good for a rally and the bar closes near its high. However, if a trader has a hard time getting back in and finds himself rarely making more than 1 – 2 points per trade, he is better off using the wide stop.