Emini and Forex Trading Update:
Thursday May 21, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini triggered a High 1 buy signal yesterday by going above Tuesday’s high. Since Tuesday was a bear bar, it was a weak buy setup. However, traders still expect the rally to reach the 200 moving average just above yesterday’s high soon.
For the bears, yesterday is a sell signal bar for a 2nd failed breakout above the April high. But it and Monday had bull bodies They are weak sell signal bars in a bull trend. There will probably be more buyers than sellers below yesterday’s low if the Emini gets there today.
Remember, I have been saying since Monday that a breakout above major resistance typically leads to several sideways bar. I also said that the Emini will probably continue up to at least a little above the 200 day moving average, which is now at 2989. If it closes above it, the rally should test the March 3 lower high before there is a 10% pullback.
Overnight Emini Globex trading
The Emini is down 8 points in the Globex session. It will therefore probably open within yesterday’s range.
It is only 28 points below the 200 day moving average. Traders expect it to get there today or tomorrow. Will it need a strong trend to get there? No, because the target is so close. Can the Emini reverse strongly down from here without reaching the target? The bears have a 40% chance.
Day traders expect the Emini to work higher, but there is no compelling reason to expect a strong trend up or down. Most days have had swings up and down. That is what day traders will expect today. Also, since today will probably open within yesterday’s range, day traders expect a trading range open for the 1st hour or two.
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 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 testing the May 1 high. That is the top of its 2 month trading range and the neckline of a head and shoulders bottom.
If it breaks above the neckline, it will trigger a major trend reversal. A major trend reversal has a 40% chance of leading to a trend and around a measured move up. Here, it would probably result in a test of the March high.
Why only 40%? Because that is the reality for major trend reversals. More often, the breakout reverses down or the rally just increases the height of the trading range.
The chance of a trend up to the March 9 high will go up if there is a close far above the May 1 high. Also, the odds for the bulls will improve if they get consecutive closes above the May 1 high. We will find out over the next few days.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market sold off in the Asian session, but reversed up to the high of the day in the European session. The rally over the past 2 hours has been in a tight bull channel. Day traders have only been buying. They are hoping to get above the May 1 high, which is about 10 pips above the current price.
The bulls hope that will result in a surge of buying and a very strong rally for the remainder of the day. However, the bars in the rally have been small. That means the buying is not particularly aggressive at the moment. Traders are wondering if there is enough momentum to get a strong breakout.
These small bars increase the chance of the rally stalling around the 1.1018 neckline. If it does, day traders will switch to scalping up and down, betting on a trading range around 1.1018.
While the bears want a strong rejection of that price, they will probably need a trading range for a couple hours before they have a chance of a trend down. With the lack of energy in the rally, there will probably not be much energy for a selloff. Consequently, the best the bears can probably get today is 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 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
After a trading range open, the Emini sold off in a parabolic wedge sell climax to below last week’s high. It then bounced and oscillated around the April high, like it has every day this week.
Traders are deciding if the breakout will succeed or fail. Since the 200 day moving average and the March 3 high are magnets above, the Emini will probably get to 3,000 – 3,100 before testing 2,600 – 2,700. It will probably enter that sell zone within the next couple 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
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.
Al,
Since the bears were successful in getting a second day to close below the April high and creating a double failed breakout on the daily chart, how does that affect the percentage of the bulls being able to successfully reach the 200 MA and the MM up to 3100?
Unless the bears get a strong reversal down, especially below the May 14 low, I think there is better than a 50% chance of a poke above the 200 day SMA.
Furthermore, there is a 40% chance of a test of the March 3 high before a break below the May 14 bottom of the month-long trading range.