Emini and Forex Trading Update:
Tuesday December 15, 2020
I will update again at the end of the day.
Pre-Open market analysis
Since yesterday was in a tight bear channel on the 5-minute Emini chart, the selloff was climactic. Therefore, day traders will expect at least a couple hours of sideways to up trading today, to begin by the end of the 2nd hour. Traders should think of every bear channel as a bull flag, because there is typically a break above the bear trend line. That will probably happen today.
Yesterday was a bear day on the daily chart. The bears are hoping that last week’s OO sell signal was the start of a 50% retracement of the November rally. If they get 2 or 3 consecutive bear days, traders will conclude that the selloff to below 3500 has begun. But with the Emini sideways for 10 days, it is more likely to continue sideways at least a little longer. A possible yearend tight trading range around the open of the month.
Picking the start of a trend when the market is sideways is a low probability bet. Markets have inertia. There is a strong tendency to continue what they have been doing. The Emini has been going sideways for a couple weeks, and reversing every 2 or 3 days. Traders will continue to take quick profits until there is a clear trend.
Remember, last week was a bear bar on the weekly chart. It is a sell signal bar for a wedge top. The bears want this week to fall below last week’s low, to trigger the sell signal. Last week’s low is therefore a magnet below.
The month so far is a small doji bar on the monthly chart. It is bad follow-through after November’s big rally. The close of this month is important. A bear body increases the chance of lower prices in January while a bull body increases the chance of higher prices. Whether or not January is up, the Emini will probably be sideways for the 1st half of next year, like I discussed over the weekend.
Overnight Emini Globex trading
The Emini is up 26 points in the Globex session. It will therefore open above yesterday’s bear trend line, and in the middle of yesterday’s range. It is also in the middle of a 2-week trading range.
While yesterday was a bear trend day on the 5-minute chart, most days for 6 weeks have had at least one reversal. Day traders will expect that again today.
Can today be a big bull trend day? That is unlikely after yesterday spent all day in a tight bear channel.
What about a 2nd big bear day? That happens only 25% of the time on the day after a Small Pullback Bear Trend. With the Emini is a 2-week trading range, it is even less likely.
Therefore, today will probably be a trading range day or a weak trend day up or down. A common example of a weak trend is a trending trading day where the Emini enters an early trading range for 1 to 3 hours, has a brief breakout up or down, and then enters another 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. 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 rallied strongly in November, but it has stalled for a couple weeks. Traders are deciding when it should begin a 2- to 3-week pullback from the strong rally. The bulls want at least one more leg up. However, a strong reversal down this week will be from a double top. The bears would look for a test of the bottom of the most recent leg up, which is the December 1 low.
A trading range is a Breakout Mode pattern. There is no strong sell signal bar, and the trading range is in a bull trend. Both of these factors make a bull breakout more likely. But until there is a breakout, there is no breakout. The chart could not be going sideways if the bulls had a big advantage. That is why this is a Breakout Mode pattern. The probability is close to 50-50, and only slightly better for the bulls.
Traders are waiting for a breakout in either direction. If the trading range starts to form 3 or more bull bars closing near their highs, the odds of a bull breakout will go up. If instead there are several consecutive strong bear bars, traders will begin to short, expecting a bear breakout.
In the meantime, they are buying intraday selloffs and selling intraday rallies and taking quick profits. The result is a continuation of the trading range.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market has had several reversals overnight. Day traders are scalping up and down.
A breakout up or down on the daily chart can come at any time. However, day traders know that reversals are more likely, and they therefore will continue to bet against intraday breakouts.
If there is a series of strong trend bars on the 5-minute in either direction, they will hold of a small swing. But until there is a clear breakout of the 2-week trading range, day traders will be hesitant to hold onto a trade all day.
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
The Emini opened with a gap up. After drifting down, it reversed up from from a failed breakout below a wedge bull flag. The rally was a Small Pullback Bull Trend, and it contained a 17-bar bull micro channel. Every low for 17 bars was at or above the low of the prior bar.
While this is a sign of relentless buying, it also attracts profit takers. The 15th bar in the micro channel was big, and it was an exhaustive buy climax. The Emini went sideways for the remainder of the day.
Today was a bull inside day on the daily chart. It is therefore a High 1 buy signal bar for tomorrow. The bulls want the year to close at a new all-time high. However, the Emini is near the top of a 3-week trading range, and the Emini has been reversing every few days. That reduces the chance of a big bull trend day tomorrow.
The FOMC announcement comes out tomorrow at 11 am PST. Day traders should be flat ahead of the announcement.
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.
Hey Al. What do you think about Nasdaq? There is a gap on the daily chart.
Small gaps typically close quickly and are minor. It has a high correlation with the Emini. A trader can trade either one, but the Emini has much more volume and is therefore more popular with institutions.