Emini and Forex Trading Update:
Tuesday October 6, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini yesterday broke above last week’s high and reached the 3400 Big Round Number. While traders expect the 2-week wedge rally to test the September 16 lower high this week, they also expect a reversal down from between 3400 and 3500. The reversal can come at any time, but the bears want a good sell signal bar on the daily chart. It is possible that the September trading range continues up to the US presidential election before there is a breakout up or down.
The bulls obviously want a successful breakout above the 5-week trading range and a measured move up to a new high. They have a 40% chance of achieving their goal. A strong breakout above the September 16 lower high would shift the probability in favor of a new all-time high.
Most recent days have had a lot of trading range price action. That is what typically happens when the market is in a trading range on the daily chart, like over the past 5 weeks. Day traders will expect more of it today, despite yesterday’s rally. However, the September 16 lower high is a magnet above, so traders expect at least slightly higher prices.
Overnight Emini Globex trading
The Emini is up 8 points in the Globex session. Since traders expect a test of the September 16 high of 3419.50 and the Emini has been rallying for 3 weeks, there is a bullish bias to the market this week.
That high is only 13 points above today’s current Globex high. The Emini could easily get there today.
On the 60 minute chart, there is another lower high at 3474. That is why I have been saying that the sell zone might be up to 3500. However, there were several lower highs below that and the Emini will probably begin to go sideways in this resistance zone. That will increase the chance of more trading range trading on the 5 minute chart.
Since there is a magnet at 3474 and the Emini has been rallying, there is an increased chance of a big bull trend day this week. Traders might conclude that the Emini is going to test 3474 – 3500. If enough do, the Emini could rally strongly for a couple days and get there. However, it is more likely that the Emini will start to go sideways today or tomorrow.
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 has been trending down since its buy climax to the September 2018 high. The 2-week rally has had 3 small legs up. It is therefore a wedge bear flag.
But the September 21 sell climax high is a magnet above, as is the September 2018 high. Consequently, the EURUSD should continue a little higher before the bears will try to resume their bear trend. If there is a sell signal bar this week, traders will look for a resumption of the test down to the June 10 high, which was the breakout point of the strong July rally.
The EURUSD is back in its 2-month trading range. That means that the bulls and bears are nearly balanced. At the moment, the probability slightly favors the bears. But the bulls see this 2-week rally as the early stage of a Small Pullback Bull Trend. They are hoping that the 2 legs down from the September 1 high is the end of the pullback from the 4-month buy climax.
But to convince traders that the July bull trend has resumed, the bulls need at least a couple closes above the September 10 high. Most traders want to see a strong break above the September 1 high.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market has been sideways overnight. It is at a new high, but it might be forming an expanding triangle. That could limit the upside from here today.
The EURUSD overnight broke slightly above yesterday’s high and the 1.18 Big Round Number. However, the developing expanding triangle means that there has been a lot of trading range price action. The rally over the past few hours will probably evolve back to a trading range within the next hour or two.
The bulls hope that today continues up in a bull trend, but at the moment, the rally from the low is probably going to soon go sideways again. The day will then be both an expanding triangle and a trending trading range day.
Since many days over the past 2 month went above and below the September 2018 high of 1.1816, the EURUSUD will probably test above it this week. It might get there today since it is only 8 pips above today’s current high.
Because of that magnet and the magnet of the September 21 high of 1.1872, traders have been buying pullbacks for 2 weeks. It therefore has been easier to make money as a bull day trader.
But the EURUSD is getting near important resistance. The bulls will become less willing to buy and the bears will be more eager to sell reversals down. This increases the chance of a few sideways days between 1.18 and 1.1872.
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
I have been saying that many traders would wait for the Emini to break above the September 16 high before selling. Today broke briefly above it and then crashed.
There is always news, but did I know that there would be news today exactly when the Emini reached my target? No, and therefore this is technical and not caused by the news. It was going to happen regardless of the news. The news was the excuse for the market to do what I have been saying it would do for a month. It just happened more quickly than was likely.
Today was an outside bar on the daily chart. There is a wedge rally to a double top with the September 16 lower high. That is a common combination at the start of a bear trend.
Today is probably the start of a 2nd leg down from the September high. However, the bears need follow-through tomorrow. If they do not get it, the bulls might get one more test of the September high within the next few days.
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.
Great Job Al, your repetitive saying that odds favor a test to high of the wedge in daily chart, i.e. September 16 high, before selling off to 3200 or 3000 is probably coming to happen, but even if it doesn’t as you mention it needs a follow through tomorrow, still your price action trading style and looking into probabilities of events are just amazing.