Emini might form wedge top in yearend Small Pullback Bull Trend

Emini and Forex Trading Update:
Thursday December 17, 2020

I will update again at the end of the day.

Pre-Open market analysis

The Emini yesterday closed in the middle of its range, like the majority of days since late October. The yearend Small Pullback Bull Trend bull channel that began on November 10 could continue up for a few more weeks, but the Emini will probably pull back for at least a couple weeks soon. This should begin in late December or early January.

The Emini has also been in a tight trading range for 3 weeks. Even though yesterday made another new high, it did not break far above the top of the range. Consequently, the Emini might still be in the range instead of beginning a new leg up. But if the bulls get consecutive big bull bars closing far above the 3-week range, traders will conclude that the rally will probably continue up for at least a measured move, based on the 3-week range.

If the Emini reverses down this week, there will be a wedge top. The tops of 1st 2 legs up were on November 16 and December 9. Traders would expect the reversal to test the start of the wedge, which was the November 10 low, just below 3500.

With most days for 2 months having at least one swing up and one swing down, traders will expect that again today. Furthermore, most days have closed either in the middle of the day’s range or near the open. Those 2 prices could be magnets again today in the final hour.

Overnight Emini Globex trading

The Emini is up 17 points in the Globex session. It will therefore probably gap up to a new all-time high. The bulls want the rally to accelerate up for a measured move that is based on the 100-point height of the 3 week trading range. If they get a couple consecutive bars closing on their highs on the daily chart, traders will expect the rally to continue up. It would increase the chance of several bull trend days over the next week.

Whenever there is a breakout, there is usually about a 50% chance it will fail. The market often goes sideways for a few days, as traders decide if the breakout will continue up or reverse down. There is a slightly increased chance that the Emini could trend up or down strongly. However, with the daily chart overbought and the Emini gapping above a trading range, the Emini will probably be sideways for a day or two as traders decide if the breakout will succeed or fail.

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. 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 is rallying again, for the 2nd consecutive day in a Small Pullback Bull Trend that began on November 4. They want the rally to continue up to the February 2018 major lower high above 1.25, without more than a 3-day pullback.

However, this is the 3rd leg up, and the 3 legs are forming a 3rd leg up on the weekly chart. If there is a reversal down within the next few weeks, there would be a nested wedge top. Traders would look for the selloff to last at least a couple weeks.

There is no sign of a top and traders expect higher prices. But the EURUSD is now at a couple of measured move targets. This could attract some profit taking.

While the location and possible wedge top are good for the bears, the rally is strong. Most traders will not sell until there is at least a micro double top. That means they expect the EURUSD to be sideways to up for at least a couple more days.

Overnight EURUSD Forex trading

The 5-minute chart of the EURUSD Forex market has been rallying in a Small Pullback Bull Trend overnight. Day traders have only been buying for both scalps and swing trades. They will not sell until there is at least a 20-pip pullback. And even then, most will continue to only look to buy until there is a trading range, that lasts at least a couple hours.

Most strong trends enter a trading range. Traders expect a trading range today. However, if the height of the range is only 20 pips, day traders will prefer to only buy. Once the rally evolves into a trading range, day traders will switch to scalping.

Summary of today’s S&P Emini futures price action and what to expect tomorrow

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. 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

After gapping up to a new all-time high, the Emini drifted down to close the gap. It then went sideways in a trading range day today. It closed one tick above the open for an almost perfect doji day. Most days for 7 weeks have closed near the open or near the middle of the day. Those are neutral days, and they increase the chance of a two to three week selloff starting soon.

Because this week’s rally is the 3rd leg up in the bull channel that began in early November, the next reversal down would be from a wedge top. That would increase the chance that it would be deeper and last longer than the other reversals over the past 7 weeks. But until there is a reversal, traders will continue to expect higher prices.

See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.

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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.

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