Emini and Forex Trading Update:
Thursday December 26, 2019
I will update again at the end of the day.
Pre-Open market analysis
Christmas week is typically the quietest week of the year. This year Christmas is on a Wednesday. Traders expect next week will be quiet as well. The Emini usually spends a lot of in tight trading ranges. They often are too tight to trade. Day traders find themselves patiently waiting the few brief opportunities each day to make money with stop order entries.
I have said several times that the Emini often either repeats some recent behavior or it does the opposite. Since last year crashed in December and violently reversed up, there is an increased chance that the current December crash up might reverse down violently, at least for a few days within the next few weeks.
This is particularly true since the December rally has had 3 legs up in a tight channel. There is therefore a parabolic wedge buy climax, which increases the chance of a week or two of profit-taking.
Also, after a strong year, there often is some tax-related selling in January. However, the bull trend is strong enough to make higher prices likely, even if there are a few surprisingly big bear days in the next few weeks.
Overnight Emini Globex trading
The Emini has been in a tight trading range overnight and for the past 2 days. Day traders will look for scalps unless there is a strong breakout up or down. Normally, when there is a Surprise Breakout in a strong bull trend, up is more likely. But because of the parabolic wedge buy climax, if there is going to be a surprise this week or next, down is probably slightly more likely.
EURUSD Forex market trading strategies
The daily chart of the EURUSD Forex market has been in a tight trading range for 4 days. It is also in the middle of a 3 month range and a 5 month range. It is therefore in Breakout Mode. This week and next week will probably remain quiet because of the holidays.
The odds are that there will be an eventual end of the 2 year bear trend and then the start of a big trading range from around 1.08 to 1.18 over the next year. Traders are deciding if the low is in or whether there will be another brief low or two before the swing up begins.
Forex markets often have major transitions around the start of a year. Consequently, there is an increased chance that the EURUSD will begin a yearlong weak rally soon.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market have been in an unusually tight trading range for 4 days. Day traders are scalping. But when the range is this tight, there are few opportunities to make much money.
Because big moves often come at the start of a new year, day traders are ready for a surprisingly big move up or down. However, they know that this is the 4th very small day. That increases the chance that today will also be very small.
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
The Emini rallied for the 1st 2 bars. It then entered a tight bull channel with small bars. This was likely to be a channel that would evolve into a trading range, and it did. It stayed sideways until late in the day when the bulls got bull trend resumption up.
Tomorrow is Friday and therefore weekly support and resistance can be magnets. The open is in the middle of the range and the range is small. Traders will wonder if the week will be a small doji bar on the weekly chart. Consequently, the open of the week might be a magnet tomorrow, especially in the final hour.
It is important to remember that the daily and weekly charts are strong and that the bulls want the decade to close on its high. Therefore, the Emini does not have much downside risk tomorrow.
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.
Small correction on the image. It should be DT LH MTR not DB LH MTR
Thanks Aristatle. Image replaced.
Were the first two bars a clue that the afternoon surprise bar was a trend resumption bar rather than a bull trap?
Whenever there is a trend on the open and then a protracted trading range, there can be either a late trend reversal or trend resumption. Trend resumption is more common. There was a double top and then a double bottom. The surprise bar was big enough to make at least a little follow-through likely. Here, the bulls got a lot of points in the final bars.
I think the size of the breakout bar following the DT and then the DB made at least some trend resumption up more likely than a bull trap.