Emini and Forex Trading Update:
Monday October 5, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini has been trading around the February high for 2 months. Traders are deciding between a new high and a test of 3000. I talked about the President’s Covid infection over the weekend. I believe that technical factors are more important.
The bears want a reversal down from a double top with the September 16 lower high. The bulls hope that last week’s small wedge bottom will lead to a new high.
I keep talking about that streak of 9 consecutive bull bars that started in late July. While traders can argue that the market is neutral, that streak is important. When there is a reversal down after a bull streak, the market typically falls below the streak. Therefore, the odds still favor a test below the July 29 bottom of that streak. And that means a break below the September 24 wedge bottom.
The biggest problem that the bears have is that the Emini has not quite reached the September 16 lower high. Traders expect the Emini to get there. Therefore, the Emini will probably go at least a little above 3400 before the bears can get a 2nd leg down from the September high.
The bulls currently have a 40% chance that this rally will make a new high. Their odds will go up if the Emini breaks strongly above the September 16 lower high.
Overnight Emini Globex trading
The Emini is up 21 points in the Globex session. It has been sideways for 4 days after a strong reversal up from a wedge bottom on September 24. Traders are deciding if the rally will continue up to the September 16 lower high.
Because the overnight range has been small and the Emini has been sideways for 5 days, day traders will expect more trading range price action again today. That means at least one leg up and one leg down.
But since the Emini is in Breakout Mode on the daily chart, there can be a surprisingly strong trend day in either direction at any time. At the moment, it is likely that there will be a test above 3400 this week. But, it is also likely that there will be a reversal down from the top of the month-long trading range some time in October.
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. I do not want the lines to be distracting. If they are longer, I make them dotted. But, they have to be visible, so I make the shorter ones solid. Buyers of both the Brooks Trading Course and Encyclopedia of Chart Patterns have access to a much more detailed explanation of the swing trades for each day (see Online Course/BTC Daily Setups).
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.
If the risk is too big for your account, you should wait for trades with less risk or trade an alternative market like the Micro Emini.
EURUSD Forex market trading strategies
The EURUSD Forex market on the daily chart has rallied for 6 days after breaking below its 8-week trading range. Traders are deciding if the breakout has failed and the bull trend is resuming.
The bears hope that this rally will be a wedge bear flag to the EMA or the September 21 sell climax high. Most likely, the bear breakout simply increased the height of the trading range and the EURUSD will go sideways more before successfully breaking out.
Trading ranges resist breaking out. Reversals are more common. There have been many reversals in the past 9 weeks and no successful breakouts. There is currently no reason to believe that the late September selloff or the 2-week reversal up will be different.
At some point, there will be a breakout up or down. But until there is a breakout, there is no breakout. Traders will continue to look for reversals and take profits every few days.
Since today is the 3rd small leg up from the September 25 low, there is an increased chance of a change this week. Either a bear leg will begin or the bulls will get a breakout above the wedge bear flag and the rally will continue up to the top of the trading range.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market has been in a bull trend overnight. However, today’s high is a fraction of a pip below last week’s high. I wrote about the weekly chart over the weekend. Last week is a buy signal bar for this week. It is a weak setup, but today’s rally is close to triggering that signal. Since it us a weak setup, there is probably not much left to today’s rally.
Because the overnight bull trend has been strong, day traders have only been buying. They are hoping for a big breakout above last week’s high. Since that is unlikely, the rally will probably evolve into a trading range around last week’s high. Once there is a 20 – 30 pip pullback, day traders will also begin to sell for scalps.
Can today reverse back down? Probably not, at least not until the bull trend evolves into a trading range for an hour or two.
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. I do not want the lines to be distracting. If they are longer, I make them dotted. But, they have to be visible, so I make the shorter ones solid. Buyers of both the Brooks Trading Course and Encyclopedia of Chart Patterns have access to a much more detailed explanation of the swing trades for each day (see Online Course/BTC Daily Setups).
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.
If the risk is too big for your account, you should wait for trades with less risk or trade an alternative market like the Micro Emini.
End of day summary
The Emini rallied in a Bull Trend From The Open to above last week’s high and then stalled. The bulls got trend resumption up to 3400 later in the day, but could not get the close above that Big Round Number. The rally should continue up to test the September 16 lower high. But, I continue to say that the next 200 points will probably be down to 3000 instead of up to 3600.
Many traders do not want to short until they believe that the top of the month-long trading range has been adequately tested. They would like to see the rally reach at least to around the September 16 high.
If the Emini breaks strongly above that high, the odds will shift in favor of a new high. But if there is a reversal down from there, traders will conclude that a 2nd leg down from the all-time high might be beginning.
The Emini is at the top of a 5-day tight trading range, but there is room to the top of the 2 month trading range. It will probably go a little higher before reversing down.
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.
Al, my chart shows the low of the 9 bull bar streak on 7/30 was 3195, i recall you mentioned it was somewhere 318x. Is that because of the Emini roll over from previous month? thx
I use continuation charts. You might be looking at the December contract.