Emini and Forex Trading Update:
Wednesday September 16, 2020
I will update again at the end of the day.
Pre-Open market analysis
Yesterday was a small bear doji day near the top of a 6 day tight trading range. The bulls are trying to break above last week’s high and then test 3500. But the bears want a double top with Thursday’s high (last week’s high) and then a selloff to 3000 – 3200. The Emini should fall below 3200, but it might 1st test 3500.
There is an FOMC announcement today at 11 am PST. Ahead of the meeting, today will be a normal day. Traders will treat the report as a restart to the day.
Day traders should exit positions ahead of the announcement. There is typically both a sharp move up and down within the 1st few minutes of the report. Day traders should wait at least 10 minutes before resuming their trading to avoid that early whipsaw.
Traders should always be open to anything after an FOMC announcement. There can be a strong trend up or down, a reversal, or a trading range.
Ignore what the Fed does. Simply trade what is on the chart in front of you. That tells you how the institutions view the report.
Last week’s high is a magnet
Thursday’s high (last week’s high) is resistance and the bears want a reversal down from a double top on the daily chart. But it is not the start of the trading range price action that formed during the 3 day collapse on the 60 minute chart. That began on September 3, just below 3500, and that is why I have been saying that this rally might continue up to 3450 – 3500. Many traders want to see it tested before concluding that there will be a 2nd leg down to 3000 – 3200 or a resumption of the 5 month bull trend and then a new high. The 3 day rally is the start of the test.
Also, last week is a High 1 buy signal bar on the weekly chart in a bull trend. It is a bear bar and it followed an outside down bar at the top of a 3 year expanding triangle. Consequently, a break above last week’s high will probably not get too far. However, traders expect a break above last week’s high. They will probably get it today.
Overnight Emini Globex trading
The Emini is up 18 points on the Globex session. It will probably gap above yesterday’s high and open around last week’s high.
Traders expect at least a small break above that high today. Since last week is a weak buy signal bar on the weekly chart, a break above last week’s high will probably not lead to aggressive buying. Also, the Emini is at the top of a 6 day trading range and reversals are more common than breakouts. Consequently, there is a smaller chance of a huge bull breakout today than in other Breakout Mode situations.
Finally, many traders will wait for today’s 11 am PST FOMC announcement before trading aggressively up or down. Day traders will treat today like any other day ahead of the announcement. With a lot of recent trading range price action, they expect at least one leg up and one leg down this morning.
They should get flat before the announcement and then wait about 10 minutes after the 11 am PST announcement before looking to trade again.
Finally, they should be open to anything and assume that everything is equally likely. That means a trend up or down, a 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. I do not want the lines to be distracting. If they are longer, I make them dotted. But, they have to be visible, so I make the shorter ones solid. 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 has been working higher for 6 days from a double bottom bull flag. It has been stuck in a tight trading range for 7 weeks. This is at the resistance of the September 2018 high.
While the 4 month rally was strong, there is a wedge buy climax on the weekly chart. The bulls are hoping to work off the climactic buying by going sideways rather than down. They expect another leg up to the February 2018 high at around 1.25 to begin soon.
The bears, however, know that a wedge top to resistance typically leads to enough profit taking to create a couple legs down. They expect a break below the 7 week range and then a measured move down to below the breakout point of the July rally. That is the June 10 high of 1.1422.
A trading range is a neutral market
When the market is in a trading range, it is neutral. This is especially true when the range lasts 20 or more bars and it tight, like this one.
This is a Breakout Mode situation. Traders know that there is a 50% chance of a successful bull breakout or a bear breakout.
Today’s 11 am PST FOMC announcement is another potential catalyst. However, there have been other catalysts over the past couple months, yet the trading range has continued. Traders will keep betting on reversals until there is a clear breakout up or down.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market overnight sold off a little, rallied, and now pulled back. While the overnight session has been in a weak bull trend, the range is small. Also, the EURUSD has been sideways in a tight range for 4 days. It has been in a 25 pip range for 5 hours. Day traders are mostly looking for scalps.
Since all financial markets tend to enter trading ranges ahead of FOMC announcements, day traders expect the EURUSD to stay quiet until today’s 11 am PST report. At that time, there is often a sharp move up or down.
But with the EURUSD in a very tight range for 4 days and in a tight range for 7 weeks, traders are not expecting a big trend today after the announcement. But if there is a series of 2 or 3 big trend bars up or down, they will swing trade. Until then, they will scalp.
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. I do not want the lines to be distracting. If they are longer, I make them dotted. But, they have to be visible, so I make the shorter ones solid. 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
Today was a trading range day with very big legs up and down. That increases the chance of more confusion and trading range trading tomorrow.
By going above last week’s high, the Emini triggered a weekly High 1 buy signal. However, the signal was weak and the Emini reversed down.
On the daily chart, last week’s high was Thursday’s high. The bears see today as a failed breakout above Thursday’s high. There is now a small higher high double top with Thursday’s high.
Today reversed down from above yesterday’s high to below yesterday’s low. It is therefore an outside down day and a sell signal bar for tomorrow.
Since there are targets above on the 60 minute chart up to around 3500, the bear rally still might go higher before there is a 2nd leg down to 3000 – 3200 on the daily chart. However, traders will sell rallies, confident of a move down below 3200 soon.
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.
