Emini and Forex Trading Update:
Thursday December 12, 2019
I will update again at the end of the day.
Pre-Open market analysis
Yesterday’s FOMC report was a non-event. The Emini has been sideways for 4 days. That increases the chance of more sideways trading again today.
Last week’s candlestick is a High 1 buy signal bar on the weekly chart. The bulls want to trigger the buy signal and then have the year to close at a new high.
However, the bears hope for a reversal down from a double top with the high of 2 weeks ago. Since the bull trend is strong on the weekly chart, the bulls have a higher probability of success. This is true even if the bears first get a selloff to around last week’s low. Yesterday is not giving day traders a sign that today will be the start of the breakout or of a reversal down.
Overnight Emini Globex trading
The Emini is down 5 points in the Globex session. Traders are deciding if the 7 day rally will continue to trend up for the rest of the year. The bears want a double top with the high from 2 weeks ago and then a trend down.
But the past 7 days have all been small and had lots of trading range price action. That means the odds are against a strong trend day today. Since markets have inertia, day traders will expect at least one reversal again today. Because the Emini is at a critical price, if there is a trend up or down, it could be relentless, but a trading range is more likely.
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.
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.
EURUSD Forex market trading strategies
The daily chart of the EURUSD Forex market reversed up from a nested wedge bottom on October 1. The October rally and the wedge bottom made a 2nd leg sideways to up likely.
That leg began on November 29. The minimum target was the 14 month bear trend line, which today is only 17 pips above today’s high.
The rally will probably continue up to the October 31 high. At that point, traders will have a decision to make. Will the rally end near the top of the 5 month trading range? Will there be a reversal down to the middle or bottom of the range? Or, will the higher low major trend reversal on the weekly chart actually lead to a reversal up into a bull trend?
Major reversals lead to trends 40% of the time. Consequently, a continuation of the trading range is more likely.
However, a 2 year pullback from a rally (the yearlong rally from January 2017 low) is becoming unusual. Therefore, traders know that a sustained rally is becoming increasingly likely. If the bulls can get 2 closes above the June high, the rally will probably continue up to the September 2018 high. That was the start of the tight bear channel on the weekly chart and it is therefore a magnet.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market had a rally yesterday, but it has been in a 20 pip range overnight. The 5 month bear trend line is only 17 pips above today’s high and it is a strong magnet. Traders therefore expect the EURUSD to get there within a few days by either going up or sideways. That reduces the chance of a big bear day this week.
However, even though the EURUSD has rallied in its 2nd leg up for 10 days, the rally has not been particularly strong. For example, it is weaker that the 1st leg up which began on October 1. It therefore looks more like a leg in the 5 month trading range than the start of a bull trend. That reduces the chance of a 3rd consecutive bull trend day today. Day traders have been scalping small reversals overnight.
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.
End of day summary
By going above last week’s high, the Emini triggered the High 1 buy signal on the weekly chart. The Bull Major Surprise bar made a bear trend unlikely. However, after a 2nd leg up to just above the top of the 13 year bull channel, there was a strong reversal down.
When a higher time frame buy signal triggers, there is often a pullback to below the high of the buy signal bar. Even though the Emini broke far above last week’s high, it sold off relentlessly to back below that price. The bulls bought again, but much less vigorously. The Emini was in a trading range for the 2nd half of the day.
Today’s Big Up and Big Down creates Big Confusion. That increases the chance of more trading range trading. Tomorrow is Friday and the bulls triggered a weekly buy signal. Consequently, last week’s high could be a magnet all day, especially in the final hour. The bulls would like the week to close above the buy signal bar’s 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,
When you have a large spike like we did this morning with a parabolic wedge, and you get 4 fairly strong bear bars like we did, when do you conclude that a 2nd leg down is off the table, was bar 17 strong enough for you get out of shorts if you sold below 13.
Thank you,
I talked about this in the chat room today as it was happening. I said that the odds were high that there would be a lower high and a 2nd leg down, possibly to the start of the channel and maybe even to last week’s high. The selloff dipped below last week’s high and reversed up.
It is fine to get out of short 4 – 8 ticks above any bar or 1 tick above a bull bar. If the Emini is going down, there will always be another chance to sell. In this case, a person could hold short if he wanted because the odds were high that there would be a 2nd leg down.