Emini and Forex Trading Update:
Thursday February 20, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini triggered a High 1 bull flag buy signal yesterday by going above Friday’s high. The bulls want a strong breakout above the 3400 Big Round Number.
Yesterday got near that target. Traders expect it to get closer within a few days. Furthermore, they expect at least a small breakout above. If there is a big breakout with follow-through over the following days, the rally will probably continue up to the Leg 1 = Leg 2 target at 3468.
More likely, the Emini will begin to pull back to the February 10 low within a week. That is the bottom of the most recent leg up and therefore a magnet below.
Also, there is a 50% chance of a selloff down to the January low by the end of March. This 3 week rally looks more like it will end up as a bull leg in a trading range that began around Christmas than a resumption of last year’s bull trend.
Most recent days have had predominantly trading range price action. Traders will expect that again today and will look for at least one swing up and one swing down.
Overnight Emini Globex trading
The Emini is down 10 points in the Globex session. The Emini is overbought on the daily chart and there is also a parabolic wedge buy climax top on that chart. There is therefore an increased chance of several bear trend days within the next couple of weeks.
However, there is no reversal down yet and the Emini has been working higher. Can the bulls get a strong rally from here? While it is possible, if there is going to be several trend days, down is slightly more likely. But with the past 6 days having mostly trading range price action, traders will continue to bet on reversals until there is a strong breakout up or down.
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.
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 daily chart of the EURUSD Forex market triggered a buy signal overnight by going above yesterday’s high. There is a parabolic wedge sell climax and yesterday was a reasonable buy signal bar. However, the EURUSD has since reversed down to just below yesterday’s low. Today is therefore an outside down day.
Today’s low so far is only 1 pip above the August 17, 1977 high. That high is the bottom of a gap on both the daily and weekly charts.
I have talked about that many times over the past 6 months as a possible magnet. Well, now we are here. Now what?
The bulls want a climactic reversal up and an end of the 2 year bear trend. That is unlikely. However, yesterday was the 3rd small reversal attempt in the past 7 days. There is therefore a parabolic wedge sell climax. And it is at a very important price. Finally, the stop for the bears is above the January 31 high, which means their risk is great. This combination typically results in profit taking.
While there is no reversal up yet, traders should expect some short covering to begin within a couple weeks. This should create sideways to up trading that will last a couple weeks or more.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market reversed down from above yesterday’s high and then up from below yesterday’s low. There is a credible buy signal at support on the daily chart. Consequently, there is an increased chance of a several bull trend days over the next few weeks.
The odds will begin to increase if today and the next several days have bull bodies. Therefore, the bulls will try to get today to close above the open. A stronger sign of a possible reversal up would be a close back above yesterday’s high after already going outside down overnight.
However, the series of bull days has not begun yet. The bears want this test of the 2017 gap to fail. They know bulls are starting to buy. The bears want a strong break below today’s low. That would increase the chance that this selloff will continue down to the January 2017 low at bottom of the 2017 bull trend.
Even though the bear trend has been strong for 2 weeks, the odds have now shifted in favor of the bulls for a couple weeks. It is more likely that the EURUSD will begin to reverse up than continue down for more than a few days. But a couple big bear days would shift the odds back in favor of the bears.
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.
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 had a wedge rally on the open and then collapsed. It reversed up in a bull channel after an extreme sell climax and closed near the open of the week. Today’s selloff might be the start of the move down to the February low.
I have mentioned many times that the 3 week rally was probably just a leg in a trading range that began around Christmas. That is still the case.
There is a 50% chance that the selloff will continue down to the January low by the end of March. However, since the selloff will be a bear leg in the 2 month trading range, it will probably have bounces up every few days.
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.
Any ideas about that big move down? It seemed like there should be a reason, but there wasn’t any news I could see ?!? Many thanks, Geoff
Most moves are technical. Moves lasting months have more fundamental reasons. I ignore the news. I have been saying that the February rally looks like a bull leg in a trading range and not a bull trend. Therefore I am saying that there will soon be a bear leg. Moves that last for just a few days are technical. Ignore the news. The news makes money by selling ads. They therefore claim that everything that happens is caused by news. That is ignorant and self-serving.