Emini and Forex Trading Update:
Wednesday November 11, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini yesterday reversed down from a new all-time high and closed below the September all-time high. It did not close at a new all-time high.
The selloff fell to below last week’s high. That closed the gap on the weekly chart. But gaps are minor patterns. A closed gap in a bull trend is not important. Look at the weekly chart this summer. There was a strong rally, even though there were 3 gaps up that closed before the week ended.
Traders are deciding if Monday was a failed breakout of the 4-month trading range or just the start of a brief pullback. Unless the bears get more big bear bars, traders expect higher prices.
The 7-day rally was extreme, as was Monday’s reversal down. Big Up, Big Down creates Big Confusion, and confusion usually results in at least a small trading range. Therefore, the Emini might have to go sideways for another day or two, and possibly longer, before the bulls will buy for another leg up.
Yesterday is a High 1 bull flag buy signal bar for today. But it was not a big bull bar closing on its high, and it followed a big bear bar. This is therefore a weak high 1 buy signal. The Emini might go more sideways than up for a few days. Also, with the bond market closed today, there will be less financial information. This will take away one force that could lead to a trend.
Overnight Emini Globex trading
The Emini is up 25 points in the Globex session. It will probably gap above yesterday’s high. That would trigger a buy signal on the daily chart.
But with yesterday being only a small bull day and Monday being a big bear day, this is not a strong buy setup. That reduces the chance of today being a big bull day. Also, yesterday had a lot of trading range trading, and the bond market is closed today. These factors increase the chance of more trading range trading today.
I mentioned that Monday broke to a new all-time high, but closed below the September high. Today will open around the September high. That high could be a magnet today. The bulls want the 2-week rally to close at a new high today.
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. 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 been in a trading range for 4 months. There have been many strong legs up and down, but each has led to a reversal instead of a trend.
It is now turning down from a double top lower high and expanding triangle with the September 10 high. The bears want a test of the bottom of the range and then a breakout below the range. The bulls believe that last week’s rally was strong enough to have at least a small 2nd leg sideways to up. But they need this selloff to stop today or tomorrow and reverse back up.
This is the decision that traders repeatedly make in a trading range. Is a reversal simply a pullback from a strong leg that will lead to at least a small 2nd leg? Or, will the pullback grow into a reversal that will test the opposite side of the range?
If the bears get one more bear day tomorrow, the odds will shift in favor of a reversal down to the November low. But if today or tomorrow reverses back up, traders will continue to expect a test of Monday’s high.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market sold off strongly overnight. But the selloff has been in a parabolic wedge and it is climactic. That typically will attract profit takers, which usually will end the bear trend and begin a trading range or a reversal.
So far, day traders have only been selling for swing trades. But the selling should soon attract profit-taking.
If there is one more new low and then another reversal, the sell climax will have 3 legs. Traders will then look to buy a reversal up. If there is a reversal up from a strong bear trend, it usually will lead to a trading range for 20 or more bars. At that point, the bulls will have a better chance of a reversal up into a trend.
At the moment, traders expect a minor new low and then profit-taking. That should lead to a trading range, possibly for the remainder of the day. If so, day traders will switch to scalping longs and shorts.
Can the collapse continue all day? When the selloff looks like this, it usually attracts profit-taking and converts into a trading range.
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
While today was a trading range day on the 5-minute chart, it was a small bull day on the daily chart. The Emini gapped up, which triggered the weak High 1 buy signal on the daily chart. It sold off briefly to below yesterday’s high and then rallied for the 1st half of the day. It then reversed down from exactly at the September 2 high, which was the all-time high until Monday.
After selling off to a new low, Emini bounced back to close near the high, just below the September 2 high. However, the Emini made a new all-time highest close by closing just above the September 2 close.
Traders are still deciding if Monday’s reversal down from above the September high will be the high of the year, or if this week is just a pullback in a bull trend. The odds favor a resumption of the bull trend, but traders need more information. They should get it over the next several 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.
Hi Al. What would you say is the probability of the bulls successfully breaking out of the 3 month trading range at this moment? Is it still only 30% for a MM to 4000? Thank you.
Unless the bulls get a couple closes above this week’s high, I think you are right.
Hi Al. I bought with limit order as bar 14 was forming, hoping that after testing 9 High (neckline of Double Bottom ), or 11 High (bed Signal bar), the market will make one more leg up after strong bull bars 12 and 13. But after I was in, the price made deeper pullback with 3 Bear bars (14-15-16), and bad signal bar 17 (bull bar, but with big tail on top), and the whole pattern looked like a triangle (bars 4-6-13-16). Was it a good idea to exit break-even, having in mind that a triangle is a breakout mode with probability 50/50? Or should I hold till my target (5 points) as the Bull had a little bit better probability after Gap up and price holding above yesterday’s high and 5 min ema?