Emini and Forex Trading Update:
Tuesday October 22, 2019
I will update again at the end of the day.
Pre-Open market analysis
Friday was a High 1 bull flag buy signal bar on the daily chart. But Friday had a bear body and it was the 3rd consecutive doji bar. That is a weak buy setup.
Yesterday triggered the buy signal by going above Friday’s high. The Emini rallied in a weak bull channel on the 5 minute chart . Traders are deciding if it will continue up to the all-time high or pull back and then make a new high.
While yesterday’s rally was not strong, it was relentless. Unless there is some surprise news event, there will probably be a new high in October. If so, October would then become an outside up month on the monthly chart.
If the Emini reverses down, the 4 month trading range will then be a triangle. That does not change anything because the chart is in a trading range and therefore already in Breakout Mode.
Overnight Emini Globex trading
The Emini is up 5 points in the Globex session. It might gap above yesterday’s high. Small gaps typically close in the 1st hour.
However, the daily chart is in a Small Pullback Bull Trend, and the weekly and monthly charts are in bull trends. Also, October often has a selloff that reverses up, and the rally can continue to the end of the year. The October 3 bear trap is a good candidate for the start of the yearend rally. This bullishness on the higher time frames increases the chance of bull trend days on the 5 minute chart.
There have been 3 pullbacks on the daily chart since the October 3 bull trend reversal. Each one lasted only a day. Therefore, traders are aggressively buying brief selloffs. If there is a selloff today, they will look for a midday reversal up or for a reversal up tomorrow.
The bears want a lower high on the daily chart. There is a small wedge top and therefore there is an increased chance of a several day pullback. However, unless the bears get a Bear Surprise Bar on the daily chart, traders expect this rally to continue to get vacuumed up to the September all-time high.
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 EURUSD daily Forex chart rallied strongly to a bear trend line and the August 26 lower high. But the rally had 3 pushes up and the last leg was especially strong. This is a parabolic wedge buy climax and a buy vacuum test of resistance. The result typically is profit taking.
While a 1 – 3 week pullback might be underway, most traders expect at least a micro double top first. The 2 day selloff will probably only last another day or two. Traders then expect one more brief push up to test yesterday’s high, and then possibly a micro double top that leads to a deeper pullback. But if there are 3 or more consecutive bear days, then a 2 – 3 week pullback might already be starting.
Because the rally is the strongest one on the weekly chart since the bear trend began 21 months ago, the bulls will look to buy a 2 – 3 week pullback. Consequently, the 1st leg down will probably attract buyers around the 20 day EMA, the October 15 low, and a 50% retracement.
Overnight EURUSD Forex trading
The EURUSD 5 minute chart continued yesterday’s selloff overnight. By trading below yesterday’s low, the EURUSD now has a pullback on the daily chart. Traders know that there will probably be a micro double top before a 2 – 3 week pullback. Consequently, many will buy around yesterday’s low, hoping for a test of yesterday’s high over the next few days.
Since the 3 week rally was unusually strong, the profit taking may continue for 2 – 3 weeks without a micro double top. As a result, there is an increased chance of a channel down on the 5 minute chart. Day traders will want to see if strong rallies on the 5 minute chart are brief and turn down from lower highs. If so, they will begin to swing trade part of their short positions.
Because of this uncertainty about whether the pullback has begun, bulls will buy selloffs and bears will sell rallies. Both will take quick profits until the 2 – 3 week pullback is clearly underway. This should create trading range price action today.
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
Today gapped up but formed a trading range for the 1st 5 hours. The bears got a surprisingly big bear breakout late in the day. Today was an outside down day that closed near its low.
Today is a sell signal bar for tomorrow and the context is good for the bears. There are now 4 pushes up on the daily chart in the past 8 days. This is a wedge top or a failed breakout above a wedge top (the 3rd push up).
But the 3 week bull channel is tight and the all-time high is a magnet just above. Therefore, the selloff will probably be minor and last a couple days. However, if the bears get a big bear bar tomorrow, traders will expect a test of the gap above the October 10 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.
Many of the bear bars in that late day selloff did not close on their lows. Is that a sign the decline was not as strong as it appears on the daily chart?
Yes. I mentioned that in the chat room. The bears need a strong follow-through bar today. But, since there is a 2 week tight trading range, they will probably be disappointed by today.