Emini and Forex Trading Update:
Tuesday January 19, 2021
I will update again at the end of the day.
Pre-Open market analysis
The Emini formed a bear bar on Friday on the daily chart. A bear bar is a bad buy signal bar for an Emini weak High 2 bull flag. That reduces the chance that the overnight rally will lead to a strong bull trend. It might instead simply add another bar or two to the 7-day tight trading range.
Friday was the 1st time since the October 30 low that the Emini had consecutive bear bars where the 2nd bear bar was lower than the first. This subtle increase in selling pressure increases the chance that the Small Pullback Bull Trend might end soon.
There is a bear ioi pattern on the weekly chart. For the bulls, last week is a pullback in a tight bull channel. It is a High 1 buy signal bar. But it had a bear body, and that increases the chance that there might be more sellers than buyers above its high.
If this week falls below last week’s low on the weekly chart, it will trigger an ioi sell signal. That will increase the chance that a move down to 3500 is underway. But with the weekly chart in a tight bull channel, the reversal down would probably be minor. A reasonable target would be the start of the channel at around 3500.
The bulls want this week to close on its high to erase last week’s bear bar. That would make traders look for at least slightly higher prices next week.
Overnight Emini Globex trading
The Emini is up 26 points in the Globex session. It therefore will probably gap above Friday’s high, which would trigger a High 2 bull flag buy signal on the daily chart. But if the gap is small, it probably will close in the 1st hour and become unimportant.
The Emini will open within the trading range of the past 6 days. The top of the range is 3820, which is only about 30 points above the current Globex price. Additionally, the all-time high is just a few points above that range, and it is an important magnet. Also, the Emini has made many new all-time highs in the past couple months. This increases the chance of a bull trend day today, but not necessarily a huge bull trend.
The bears want a lower high or double top on the daily chart. They hope that the January 8 all-time high is the start of a selloff down to the November 10 low at around 3500.
With most of the days over the past month having at least one reversal, traders will expect at least one reversal today. But if the Emini forms an early Small Pullback Bull Trend that lasts at least a couple hours, day traders would continue to only buy.
Friday’s setups
Here are several reasonable stop entry setups from last Friday (before holiday). I show each buy entry with a green rectangle and each sell entry with a red rectangle. 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 is reversing up from the bottom of a 2-month trading range in a bull trend. However, yesterday was a bear bar, and that is a weak buy signal bar. Also, the selloff was strong. That makes it likely that the 1st leg up will be minor.
For example, it might stall at the January 13 high. The bears will try to create a double top with that high. If there is a lower high, the bears will hope that it is the start of a lower high major trend reversal. It would also be a head and shoulders top. A major reversal has a 40% chance of actually leading to a reversal into a bear trend. More often, the market continues sideways.
Don’t forget the January 6 wedge top. A reversal down from a wedge top usually has a couple legs. While there is a 2nd leg down that began on January 13, when the 2nd leg begins within a tight bear channel, the entire channel is usually just a complex 1st leg down. Consequently, unless this rally becomes very strong this week, traders will expect at least a test of yesterday’s low after a test of the January 13 minor lower high.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market rallied strongly overnight. Day traders have only been buying.
Since the day’s range is almost as big as most of the big days of the past month, there is probably not too much left to the rally today. If the EURUSD starts to go sideways, day traders will switch to scalping.
If the trading range is about 30-pips tall, day traders will also begin to sell for scalps. There is only a 20% chance that today will reverse back down to the low.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
I will post chart after the close.
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. 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 sold off to below yesterday’s high and the 60-minute EMA, but then reversed up from an OO (consecutive outside bars). The upside breakout failed, and the Emini made a new low. The downside breakout failed as well. The Emini then broke above the lower trading range and formed an upper trading range. Today was a bull Trending Trading Range day. It closed just above the open, and it therefore was a doji bar on the daily chart.
The Emini has been in a tight trading range for 9 days on the daily chart. While the odds always favor a new high when the market is in a bull channel, after a channel has lasted 50 bars, the odds of a reversal down increase. Calling the exact top is impossible, but the Emini should begin to turn down to 3500 within a few weeks.
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
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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.
I have always wondered (and this is an excellent day to ask) about 80 % of BO fails. Are those BO that BO (there is no breakout before there is a breakout) or are the ones that turn 1 point before it BO. As if the 18bar range is 3800 at top and you have a 50 % pb and a rally turning at 3799. Is that a failed BO included in the 80 % failed Breakout tese? Or just a bull leg in a trading range?
I hope this makes sense. My feeling is that it needs to be a breakout regards to the tese “there is no BO before it is a BO”. So my assumption is that the 80 % of BO fail are BO that actually make a BO and not turning before or even accurately at the “BO line”. 1 tick over and it is a BO.
Or am I wrong? That is if the bar has a big wick turning 1 tick below. Is that a failed BO aswell?
Maybe nitpicking for alot of people, but I use this tese alot and would be good to know if the odds when there is a BO that there is 80 % chance of failure or alot of those % in favour of failure is “used” on bulllegs in a trading range?
As you know, markets can create endless variations of everything. Every rally in a trading range is an attempt at a bull breakout. If the rally reverses down from anywhere in the upper third, or from above the range, I would call it a failed breakout attempt. The reason I am so flexible is that the market has so many variations of everything. If I am going to make a generalization, I want to include most variations.
My other 80% rule is for trends. I say that 80% of trend reversal attempts fail. I could use the 3-hour rally today as an example. Any of the reversal attempts could have led to a bear trend, but most were brief and became bull flags.
At the high, the reversal caused the bull trend to end, but there was no bear trend. Therefore, the trend reversal failed to reverse the trend, although it succeeded in ending the trend.