Emini and Forex Trading Update:
Wednesday October 7, 2020
I will update again at the end of the day.
Pre-Open market analysis
I have been saying for a month that 3400 – 3500 was the sell zone and that many traders wanted to wait for a break above the September 16 high before selling. Yesterday briefly broke above that high and then collapsed.
There is a wedge rally over the past 2 weeks to a double top with the September 16 high on the daily chart. That is a common sell setup. Yesterday was an outside down bar and therefore a sell signal bar. Not only was yesterday outside down, it closed below Monday’s low. That increases the chance the resistance of the September 16 high will hold.
The bulls might try for another test of the September 16 high before the bears get their 2nd leg down from the September 3 all-time high, but traders will look to sell rallies.
Trends need follow-through
It is a mistake to assume that one day makes a trend. The Emini has been in a trading range for over a month and it might continue sideways until the US election. For example, if it drifts down 300 and then bounces, the bulls will see a head and shoulders bull flag on the daily chart. They will buy, hoping to break above the neck line, which is yesterday’s high.
Today is important. Trends panic traders. If today is a big bear day, then the bear trend from the September 3 high is likely resuming. But if today is a bull day, the bears will be disappointed. Disappointment is a hallmark of a trading range. That would increase the chance that the trading range will continue, maybe for a few more weeks.
That July/August streak of 9 consecutive bull bars was an important buy climax. Traders should expect the pullback to fall to at least a little below that July 26 bottom of the streak, which means below the September low.
Overnight Emini Globex trading
The Emini is up 27 points in the Globex session. The day after an outside day is often an inside day. If the bulls can keep today inside of yesterday’s range, today will be a buy signal bar for tomorrow. They will then try again to break above the September 16 lower high within a few days.
The bears want a 2nd consecutive big bear day. But since the Emini has been in a trading range for 2 months, the bears will probably be disappointed by a lack of strong follow-through selling today.
Most bear trend days make a high early in the day. The bears therefore will try to get a reversal down in the 1st couple hours. If they are unable, today would then probably be either a trading range day or a bull trend day.
Can today be a big bull trend day. That is unlikely after such a strong bear surprise. However, it could be a weak bull trend day and get back above last week’s high. That would undo a lot of yesterday’s bearishness and increase the chance that the 2-month trading range will continue.
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 formed a wedge bear flag over the past 2 weeks. Yesterday was a good sell signal bar. By going below yesterday’s low overnight, the sell signal on the daily chart triggered.
However, the EURUSD immediately reversed back up. Today so far is a bull bar and therefore a terrible entry bar for the bears.
The 2 week rally has been in a Small Pullback Bull Trend. The September 21 sell climax high is a magnet above. If the bulls can break above it and above the September 10 high, traders will look for a test of the September 1 high.
The EURUSD is back in its 2 month trading range. That means there is also always both a bull trend and a bear trend. If it continues down in a series of lower highs and lows, traders will say the bear trend began on September 1. If the 2 week rally continues up to above the September 1 high, traders will say that the 4 month bull trend resumed on September 25.
Because of the wedge top at resistance on the weekly chart (not shown), the odds are slightly better for the bears. But the EURUSD is back in its 2 month trading range. Consequently, the odds are only slightly better than 50%.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market traded below yesterday’s low overnight, which triggered a sell signal on the daily chart. However, the breakout was small and the EURUSD reversed back up. The bulls want today to break above yesterday’s high. Today would then be an outside up bar after yesterday’s sell signal bar. That would increase the chance of a test of the September 21 sell climax high.
If today closes near its high, traders will see today as a buy signal bar. They would wonder if the wedge bear flag on the daily chart failed and if the Small Pullback Bull Trend is continuing up.
The reversal up from below yesterday’s sell signal bar makes a bear trend unlikely today. While the EURUSUD has been in a bull trend for 8 hours, the trend has not been particularly strong.
It has been easier to make money as a bull, but there has been a lot of trading range price action for 5 hours. That means that day traders are also willing to sell reversals down for scalps.
With the lack of energy for several hours, today will probably not go much higher. The rally will probably stall around yesterday’s high.
The fight will then be over the close. The bulls will buy selloffs, trying to get today to close near its high. That would make higher prices likely tomorrow.
The bears will sell rallies. They know today will remain a bull day, but if they can get the day to close in the middle of the range, they will try to break again below yesterday’s low tomorrow.
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
The Emini gapped up on the open to the middle of yesterday’s collapse and then went sideways for a few hours. This is not how a bear trend typically begins. It then rallied for the rest of the day and retraced most of yesterday’s selloff. There was late profit-taking, but the day still closed above its midpoint. Today was a bull trending trading range day.
Today was a bull inside day after an outside day on the daily chart. There is now an ioi Breakout Mode pattern. Today is both a buy and sell signal bar for tomorrow.
With today erasing so much of yesterday’s collapse and closing in the upper half of the range, and with the September 16 high still a magnet above, the Emini will probably test that high again this week. Also, today increased the chance that the Emini will trade higher up in the 3400 – 3500 sell zone.
Traders still should expect a break below the September low before there is a new high. However, the trading range could continue for a long time before the Emini has a 2nd leg down from the all-time high.
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,
Just wanted to clarify that you mention July 26 as the bottom of the streak, but the streak started 2 days after that (because there was one bear bar after July 26 bottom). Does that mean that the bottom of the streak is defined as the bottom of the TR from which the streak started? Till now I used to consider the low of the first bar of the streak as the streak bottom.
Thanks Al!
So grateful for you sharing your experience.
I’m in the trading room and know you believe the news has little effect. How do you reconcile that the market made it up to key resistance at exactly the same time Trump announced his news?
There is always news. The market sold off from just above the target. The news at the moment was Trump. If not Trump, there would have been something else. It was technical.
News people think everything is caused by the news. They see themselves as the center of the universe. They cannot conceive that anything other than news can cause something to happen. This was technical. Since they control the flow of information to us, when they all say the same thing, everyone just assumes they are right. WRONG!
Hi,
Very interesting daily posts. i just wish you could post the pre-market article a bit earlier; giving us time to take it into consideration while setting up our plan for the day.
B. Rgrds
It seems Al is already up at O Dark-Thirty (Pacific Time)
developing his daily analysis.
Given his 25/8 commitment to followers and trading, there don’t appear to be any more seconds left to achieve earlier publishing.
Gradually one gets used to digesting the update within 10 minutes (actually you would start having some spare time left 🙂 )
Also, Since Al includes the activity in the Globex session, so that is one added advantage of having the update as close to the market open as possible because then he has included the latest movements of the Gx session.