Emini and Forex Trading Update:
Tuesday February 18, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini rallied for the past 2 weeks after a 4% correction in January. The bulls hope that this is the resumption of the 4 month bull trend.
However, that 4% selloff was unusual. It increases the chance that the bears will soon try again. As a result, traders are less certain that the rally is a resumption of the bull trend. It might instead be a bull leg in a trading range that began around Christmas.
The rally has had 3 pushes up that began with the January 29 high. Therefore it is a wedge. But the 2nd leg up was strong enough to start the count over again. As a result, there might be one more brief new high before there is a test down.
Friday was a bear inside day after Thursday being an outside day. It is therefore an ioi buy and sell signal bar for today.
If there is selling this week, the bulls will look at it as a 1 – 3 day bull flag. They want the bull trend to resume quickly.
The bears want a reversal down from a wedge top. They would like the selling to grow into a bear leg in the January trading range and for it to continue down to the January low.
If this week gets a couple closes above 3400, the Emini will probably continue higher through the end of the month. But if there is a strong 2 – 3 day reversal down, traders will begin to wonder if February will be like January and completely reverse its early rally.
Overnight Emini Globex trading
The Emini is down 12 points in the Globex session. It has been unable to get above the 3400 Big Round Number despite many attempts over the past 4 days. This increases the chance of a test down to the most recent buy climax low. That is the February 10 low of 3316.25.
Most of the trading over the past 4 days has been sideways. Day traders will continue to look for reversals every 2 – 3 hours. However, since the Emini is overbought and struggling at a resistance level, there is an increased chance of a big bear day at any time.
What about a big bull trend day? That is less likely because the daily chart is overbought.
Friday’s setups
Here are several reasonable stop entry setups from Friday. 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.
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 is just above the bottom of the gap above the April 17, 2017 high. I have been saying for 6 months that this selloff might not end until it tests that high.
Furthermore, closing the gap does not have to be the end of the 2 year selloff. The January 2017 low is the 18 year low. There is no reason to believe that the EURUSD will hold above it or above par (1.00).
Markets have inertia. They tend to continue to do what they have been doing. The EURUSD has been going down for 2 years. Yes, it is now near major support. If there is going to be a major trend reversal up into a bull trend, it will probably come at major support, like the April 2017 gap or the January 2017 low. But until there is a reversal, there is no reversal. Traders should continue to expect lower prices.
Minor profit taking soon
The 3 week selloff is unusually strong. That means it is unsustainable. The stop for the bears is now far above. Many will want to reduce their risk. The easiest way is to take some profits. Traders should expect about a 150 – 200 pip short covering rally to begin within a week or so. Yesterday might be a 1 day Final Bear Flag. But traders want to see a strong buy signal bar before they begin to believe that the selling will stop for a couple weeks.
The 1st reversal up from a strong bear trend is typically minor. Consequently, even if the bulls get a 2 week, 200 pip rally, it will probably not be the start of a bull trend. If would likely lead to a test of the current low and a trading range or to a resumption of the bear trend.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market sold off sharply over the past hour to just below the 1.08 Big Round Number. In addition, the low is in the gap above the April 17, 2017 high of 1.0777.
Most gaps on the daily chart close. But there is often a big bounce from just above the bottom of the gap. Also, sometimes, there is a trend reversal up from around a gap.
Friday was an inside day on the daily chart. It could therefore be a 1 day Final Bear Flag.
Even though the EURUSD on the 5 minute chart is testing the gap, there is no reversal yet. Traders do not yet know if the sell climax of the past hour is simply a sell vacuum test of support. If so, it could lead to a sharp short covering rally today or soon.
Less likely, the 3 week collapse will continue down to the 2017 low of 1.0340 without a 2 week short covering rally first.
The selling over the past 3 weeks has been unusually extremely. Traders should expect it to end this week. It can end with an evolution into a trading range or with a sharp reversal up. But until it ends, traders will continue to sell small rallies.
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.
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 on the open from a Low 2 bear flag just below the EMA. It then reversed up from a wedge bottom. The rally stalled around the open of the day and the 60 minute EMA. Then the Emini went sideways into the close.
Today is a High 1 bull flag buy signal chart on the daily chart. Since it was a doji bar, it is a weak buy signal bar.
The Emini is in a 6 day tight trading range. It has been unable to break above 3400. While it still might within a week or so, it is likely to test the February 10 buy climax low within a couple weeks. Furthermore, there is a 50% chance of a test of the January low by the end of March.
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.
It is therefore an ioi buy and sell signal bar for today.
Yes. Emini should test February 10 low within a week or two and the January low by the end of March.