Emini and Forex Trading Update:
Monday April 6, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini had a 7 day rally to the EMA on the daily chart last week and sold off for 3 days. But since there were no pullbacks in the rally, the bulls were being aggressive. That means they will probably buy this 3 day selloff, expecting at least a small 2nd leg sideways to up.
Furthermore, the reversal up followed a parabolic wedge sell climax. Traders therefore expect a 2nd leg sideways to up on that basis as well.
On the weekly chart, last week was a bear bar and a pullback in a strong bear trend. It is therefore a Low 1 sell signal bar. Traders might want to see what’s below its low. Will there be eager bears selling below the Low 1 bear flag sell signal bar? Or will the bulls get a reversal up from a higher low on the daily chart?
The rally on the daily chart and the strong bear trend on the weekly chart create confusion. That makes sideways trading likely. However, the top of the trading range will probably be above 2700, as I discussed over the weekend.
Today will probably gap up. That will create a 3 day island bottom. That increases the chance of a bull trend day today.
Overnight Emini Globex trading
The Emini is up 90 points in the Globex session. There will probably be a big gap up. But there is only a 20% chance of a relentless trend up or down from the open.
When there is a big gap up, the Emini is far above the average price (the 20 bar EMA). Traders do not like to pay far above the average price. Therefore, when there is a big gap up, there is an 80% chance of some trading range trading over the 1st hour or two.
The bears will try to create a wedge top or double top and then a reversal down. The bulls want to buy near the EMA. They will look for a double bottom or a wedge bull flag near the EMA.
If there is a trading range open, it is a sign of hesitation. It reduces the chance of a relentless trend day up or down. If there is a trend after a trading range, it will typically evolve into a trading range or reverse after a few hours.
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 (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 daily chart of the EURUSD Forex market has sold off for 6 days. Last week was a big bear bar closing near its low on the weekly chart (not shown). Traders will want to know if there will be more buyers or sellers below the low of that sell signal bar.
There was a strong rally 2 weeks ago. Also, the selloff is now at the bottom of the 7 month trading range. Furthermore, each of the past 5 days had a conspicuous tail on the bottom of the bar, which is a sign of buying. These factors make a bounce likely early this week.
Therefore, while the bears will probably trigger the weekly sell signal by getting a break below last week’s low, there will probably be more buyers than sellers there. Traders expect a 3 – 5 day bounce to start this week.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market has sold off in a broad bear channel overnight. The low so far is 10 pips above last week’s low. Traders expect a reversal up from around last week’s low.
This week could reverse up from above last week’s low and form an inside bar on the weekly chart. But 6 consecutive bear bars represents relentless selling. It is therefore more likely that the EURUSD will fall below last week’s low either today or tomorrow.
However, as I said above, the weekly sell signal will probably fail. There will probably be more buyers than sellers below last week’s low. The odds favor a 200 pip bounce to begin this week.
What about today? The overnight selloff has lacked momentum. The bars are small and the bulls have been able to make money in the bear trend.
Day traders will continue to buy selloffs and sell rallies today. While the EURUSD might fall below last week’s low, there will probably be buyers below. That limits the downside today.
Even though there might be buyers, the bars and legs are small. That lack of energy will limit the upside.
Today will therefore probably transition into a trading range. The bulls want the day to close above the open so that the streak of 5 consecutive bear days will end. That would increase the chance of a bounce this week.
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 (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 gapped up and formed a 3 day island bottom. I have been saying for a couple weeks that there would probably be a rally back to 2706.00. That is 20% down from the high.
As long as the Emini is below that level, it is still in bear market. After a parabolic wedge sell climax down to 35% below the high, the bears would buy back shorts and value bulls would buy.
Today was a buy climax. That increases the chance of more sideways price action tomorrow. The bulls rallied strongly to just above last week’s high.
A bear trend is unlikely after a Bull Surprise Bar on the daily chart. Also, 2706.00 is a strong magnet above. Traders should expect higher prices over the next week.
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.
It did reach the 2700 target and way beyond, in a single breath. You`ve been saying it for some days now, of course, I didnt listen 🙂
Anyways, there has to be some pullback here and some TR. Looking forward to the analysis today. Thank you, Al!
I love your wisdom and analysis Al. Thank you so much for sharing so insight-fully and consistently with us all!