Emini and Forex Trading Update:
Friday May 10, 2019
I will update again at the end of the day.
Pre-Open market analysis
There were strong bull days on Thursday and Friday last week. However, the Emini yesterday opened near Friday’s low and sold off to test the 2800 Big Round Number. A bear break below a reasonable buy setup typically has at least a small 2nd leg down. Consequently, the Emini will probably trade lower over the next week or two. The next support is the March 25 low of 2789.50. Below that is the March 8 low of 2726.50. Finally, there is a gap above the February 8 high of 2686.25
The 2 week selloff has been in a tight bear channel. Once there is a reversal up on the daily chart, there will probably be a lower high. The selloff is strong enough for at least a small 2nd leg sideways to down after the 1st 3 – 5 day rally. Therefore, this selloff is probably a bear leg in what will become a trading range over the next couple of weeks.
Even if the selloff continues down to 2600 and retraces half of the 2019 rally, the odds are that the bulls will buy it. The bears need consecutive big bear bars to convince traders that this selloff is the start of a bear trend. Until then, the odds are that it is a pullback from the 2019 rally and there will be a rally to a new high.
3 – 5 day bounce soon
The midday reversal up yesterday was strong. This is a sign of aggressive bulls. If there is a rally on the open, yesterday’s late selloff could be a higher low major trend reversal.
Since the daily chart is getting oversold, a rally is likely soon. One target is Friday’s high. It was a strong bull bar and a buy setup on the daily chart. Many bulls who bought will buy more lower, expect the Emini to get back to their original buy around Friday’s high. They will probably be right, even if the selloff continues down for a few more days first.
But, the 3 week selloff has been in a tight bear channel. When that is the case, the 1st reversal up usually forms a lower high. There is then a 2nd leg sideways to down. That is still likely.
Overnight Emini Globex trading
The Emini is up 16 points in the Globex session. There has been bad follow-through after bear bars on the daily chart all year, including during this 3 week selloff. Consequently, there is a slightly increased chance of a bull day today. This is true even though the selloff will probably test lower over the next couple weeks.
Yesterday formed a Spike and Channel bear trend on the 5 minute chart. That usually evolves into a trading range. The midday rally was a bull leg in the range and the late selloff was a bear leg.
On the 5 minute chart, there is now a big double top and a higher low major trend reversal. That is also a head and shoulders bottom. The bulls therefore have a 40% chance of a bull trend today. Since the buying yesterday was strong and the daily chart is oversold, there is a reduced chance of a strong bear trend day today.
With strong legs up and down yesterday, day traders expect swing trades lasting at least a couple of hours today. In addition, there is an increased chance of a bull trend day today.
EURUSD Forex market trading strategies
The EURUSD daily Forex chart has been in a tight trading range for 2 weeks. It is therefore in breakout mode, where there is always both a buy and a sell setup.
The bulls have a higher low major trend reversal. In addition, there have been many bull bars over the past 2 weeks so the buying pressure is good. Finally, the April 12 lower high is nearby and it is a magnet.
For the bears, the daily chart has been in a bear channel for a year. It keeps forming lower highs and lows. There is now a small double top. Since it is in a bear trend, it is a double top bear flag.
However, yesterday was a small sell signal bar and today so far is a small entry bar. This might not be enough to break below the 2 week tight trading range. Consequently, most traders are taking quick profits.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart broke below yesterday’s low and triggered a sell signal on the daily chart. It reversed down yesterday from above last week’s high. Furthermore, last week’s range was small. The EURUSD Forex bears could therefore get a break below last week’s low. This week would then be an outside down week. That would increase the chance of a break below the April low over the next week.
In the past 10 minutes, the 5 minute chart broke below a 2 day trading range. Consequently, the bears are hoping that the double top on the daily chart will be the start of a move down to below the April low.
However, this breakout so far is small and there is no follow-through selling yet. The bears need more big bear bars closing near their lows. If they get them, they will sell at the market and small pullbacks for both scalps and swing trades.
But, the daily chart is still in the middle of its 2 week tight trading range. Most breakout attempts fail. Unless the bears get follow-through selling over the next hour, the bulls will continue to buy reversals up for scalps. They will wait for the 5 minute chart to go sideways for 10 or more bars before looking to buy. If it does, the result will be another day with mostly sideways trading.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
Yesterday was a big bear day. Today opened near its high and rallied. It then entered a trading range midday. The bears who sold yesterday’s close are trapped. This is similar to what happened on January 3 and 4, although much weaker.
In January, there was a strong reversal up from a 10 year bull trend line. Now, the Emini is reversing up from a bull flag. In addition, the 3 week bear channel is tight. Finally, today was not a big bull trend day on the daily chart. The odds favor a 3 – 5 day rally now or soon and then a lower high.
Whether or not there is a lower high and a test of yesterday’s low, or even of the February 8 gap, the odds favor a new all-time high within a couple months.
See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.
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 Intraday Market Update page.