Emini and Forex Trading Update:
Monday March 8, 2021
I will update again at the end of the day.
Pre-Open market analysis
The Emini formed a big bull bar on Friday. Since it had a big tail below, Friday formed a micro double bottom with Thursday. It is a buy signal bar for today. But after 3 big bear days, this is probably a minor buy signal.
There is also a wedge bull flag on the daily chart. That makes it likely that the bulls will get at least a couple small legs sideways to up this week. The chart is now almost back to neutral.
But if there is a rally, and it turns down from either the February 24 or March 1 lower highs, there will be a double top lower high major trend reversal. A break below this week’s low, which would be the neckline, could lead to a measured move down.
Despite the strong legs up and down for the past couple weeks, the Emini is still in February’s trading range. The bulls need consecutive strong bull bars to undo the bearishness of 3 consecutive strong bear bars last week, and 2 more from the week before.
Overnight Emini Globex trading
The Emini is up 3 points in the Globex session. If it gaps up, the gap will probably be small. Small gaps typically close in the 1st hour.
Because Friday is a buy signal bar, for a wedge buy flag in a bull trend on the daily chart, today will probably trade above Friday’s high. That will trigger the daily buy signal. The bulls are hoping that last year’s bull trend is resuming.
Friday’s strong reversal up makes it likely that the Emini will trade at least a little higher this week. However, the bulls will need a 2nd consecutive big bull day today to undo last week’s 3 consecutive big bear days. Therefore, traders expect that if today will be a bull day on the daily chart, it will probably not be a big bull day closing on its high.
Friday was an extreme buy climax on the 5-minute chart. There is therefore a 75% chance that the Emini will begin at least 2 hours of sideways to down trading by the end of the 2nd hour. Also, there is only a 25% chance that today will be another extremely strong bull trend day.
The open will be important. If there is a series of strong trend bars in either direction, there will be an increased chance of a strong trend day. Since an early trading range trading is likely, traders will expect any early sharp leg up or down to reverse. If there is a trading range open, it reduces the chance of a big trend day.
EURUSD Forex market trading strategies
The EURUSD Forex market on the daily chart is breaking below a 3-month trading range. The bears want a measured move down based on the 400-pip height of the range. That would be down to the November 4 major higher low.
The February 5 low is also the neckline of the January 22/February 16 double top. The breakout above failed, and the EURUSD has been breaking below for a couple days. That measured move target is just below the November 11 low. That was the start of the bull channel after the spike up in early November, and the start of a channel is always a magnet.
While its possible that the selloff will collapse to the November 11 and November 4 lows, that is unlikely. Remember, the EURUSD was in a trading range for 3 months until this week. That November 4 low was the bottom of another 3-month trading range. That means that most of the trading since the end of July has been sideways. Since the EURUSD is still in that range, it is more likely to soon begin to convert into a trading range again.
A new trading range might not be obvious until after the EURUSD falls to the November 11 low, but the EURUSD will probably bounce this week. This is because February 26 was a spike down, and the past 4 days are forming a parabolic wedge bear channel. It is easier to see on the 15- or 60-minute charts.
This is a sell climax, and it should attract profit takers soon. That should lead to a bounce for at least a day or two, and it could begin a test above the February 5 low, which is a breakout point.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market sold off overnight, but the selloff has been in a fairly broad channel. Also, the daily chart has sold off strongly for 4 days, which is extreme. Day trading bears will begin to take profits below prior lows on the 5-minute chart and switch to selling rallies instead of at the market.
There have been many reversals up overnight. While none has yet been 20-pips, the bulls are starting to buy, expecting more sustained profit taking from the bears. In general, when looking to buy in a bear trend, a trader has a better chance of making money after he sees other bulls making money. That usually requires at least a 20-pip bounce.
Also, today’s range is already fairly big. That reduces the chance that it will get much bigger. Therefore, even though the EURUSD has been in a strong bear trend for 4 days, traders will expect some short covering today and tomorrow and a transition into a trading range on the 5- and 60-minute charts.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
After Friday’s buy climax, today was likely to have a lot of trading range price action, and it did. While it broke above Friday’s high and triggered a High 1 and wedge bull flag buy signal, it failed to rally strongly above Friday’s high. Since it closed near its low, it is a Low 1 sell signal bar for a bear channel on the daily chart. Sometimes a bear trend begins with a series of minor lower highs, like what have formed over the past few weeks.
The bulls will try to continue the rally might up to the February 24 and March 1 lower highs this week. However, the bears will try to get a reversal down from a double top. Unless the bulls get consecutive big bull bars this week, traders should assume that lower prices are more likely.
See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.
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.