Emini and Forex Trading Update:
Wednesday April 29, 2020
I will update again at the end of the day.
Pre-Open market analysis
There is an FOMC announcement today at 11 a.m. PST. That often leads to a big move up or down. However, there will probably not be any surprises from the meeting.
There are now 3 clear legs up on the daily chart. This is a wedge rally. A wedge is a buy climax. It typically attracts profit-takers. Traders should expect a 2 – 3 week pullback to begin either this week or next week.
Yesterday had a bear body and is therefore a sell signal bar. But after a strong 5 week rally, the Emini might have to go sideways to up for a few days before going down. Traders expect it to begin to pull back soon.
The importance of the 20 week EMA
I have been saying that the Emini would probably have to reach the 20 week EMA before pulling back. It got there yesterday on the open and sold off. The Emini might test it 2 or 3 days before traders decide that the resistance will hold or that the rally will continue to the March 3 lower high.
Last week was only a doji bar on the weekly chart. That is a weak buy signal bar. A weak buy signal bar often has more sellers than buyers above its high.
This week triggered the buy signal by going above last week’s high. But there is now a 6 bar bull micro channel, which is extreme. It is at the resistance of the 20 week EMA and it is coming after a huge selloff.
A weak buy setup at resistance typically does not lead to a strong leg up. More often, there is a pullback that starts within a couple bars. Therefore, the Emini will probably begin to pullback soon for 2 – 3 weeks.
The selloff might retrace about half of the rally. Since the rally has been surprisingly strong, traders will look to buy the selloff. They expect at least a small 2nd leg sideways to up to test the March 3 lower high.
The Emini has been in a trading range for 2 1/2 years. It will probably remain in the range for the rest of this year.
Overnight Emini Globex trading
The Emini is up 45 points in the Globex session. It will therefore open with a big gap above yesterday’s close. A big gap usually leads to a trading range for the 1st hour. The bulls will look to buy a wedge bottom or double bottom near the EMA. However, the bears want a reversal down from a wedge top or double top. There is only a 20% chance of a strong trend day from the open up or down.
The 20 week EMA is at 2901 and it is significant resistance. However, the bull trend is strong and it could easily continue up to the next resistance within the next couple weeks. That is the March 3 lower high of 3125.75.
Most days over the past month have had a lot of trading range price action. Day traders will expect that again today. But, there have also been at least 1 or 2 swings up or down every day as well, Because the weekly chart is at important resistance, there is a slightly greater chance of a trend today.
However, day traders should go flat before the 11 a.m. PST FOMC announcement. This is because there is a 60% chance of at least one big reversal coming within the 1st few minutes. It is better to wait at least 10 minutes after the report before resuming day trading. Furthermore, day traders should be open to anything. That means a strong trend up or down, a big reversal, or a trading range.
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. 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 triggered a buy signal on Monday. However, it has gone sideways rather than up. Because the EURUSD is in an 8 month trading range, traders expecting disappoint.
The bears want yesterday’s high to be a sell signal for a double top with last week’s high. But because this is in a trading range, there will more likely be buyers below the April 24 low. That is the neck line of the double top. If there is a reversal up from below that low, the month-long selloff will evolve into a wedge bottom.
The bears want a strong break below the March low and then a move down to par (1.0). While they might achieve their goal at some point, 80% of breakout attempts fail. Traders will continue to look for reversals every few weeks. Since the EURUSD has sold off for about a month after the March 27 rally, traders expect a leg up soon.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market rallied to just below yesterday’s high and reversed down to just above yesterday’s low. Today is so far an inside day.
Since yesterday was an outside day, if today remains inside, there will be an ioi (inside-outside-inside) setup. That is a Breakout Mode Pattern on the daily chart. However, the daily chart has been in Breakout Mode for several weeks. Therefore, an ioi does not change anything.
Today’s range has been small and today is the 3rd consecutive small, sideways day. Day traders have been scalping.
The range will probably stay small until the 11 a.m. PST FOMC announcement. While no one expects any surprises, all financial markets often make big moves after the report. Day traders should exit positions ahead of the report and wait at least 10 minutes afterwards before taking new day trades. This is because there is a 60% chance of at least one fast reversal within the 1st several minutes after the announcement.
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 (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
Today was an FOMC day, but as expected, there was no strong reaction. The Emini rallied in a Small Pullback Bull Trend ahead of the 11 a.m. It was in a trading range for the rest of the day. There was some bull trend resumption after the FOMC announcement.
Most importantly, the rally reached the February close. Consequently, April undid all of the March damage.
However, the monthly chart has been in a trading range for 2 years. It will probably stay in a trading range for the remainder of the year.
Because last week was a weak buy setup on the weekly chart, there is an increased chance of a reversal down at the end of the week. However, the bulls want the month to close tomorrow above the February close. April will then have reversed the March crash.
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, as you frequently say in the trading room, huge bull trends rarely become immediately a bear trend / sell-off without first becoming a trading range. Is it plausible that we end up sideways after this massive buying, instead of going down for 2-3 weeks? So sideways from here, push to March 3 and then some pullback.
The monthly chart will probably remain in a trading range all year. Trading ranges have legs up and down. If the Emini goes sideways and then up to the March 3 high, nothing will have changed. The is a 70% chance of a bear leg beginning before there is a new all-time high.
Hi Al,
Thanks for your analysis. Yesterday was a big sell off from the beginning of the market from the weekly EMA 20. And today was a huge buy again and most probably to close at or above February close. What will be this implication? How will the month’s close impact in the monthly chart? Thank you.
I am relying on Friday and I answered your question in this morning’s post.