Emini and Forex Trading Update:
Wednesday May 12, 2021
Pre-Open market analysis of daily chart
- Last week broke above top of April trading range and today broke below bottom of the range.
- Yesterday closed just above the open of the day and therefore it was a weak bull day.
- Today has weak buy signal bar for reversal up from bottom of 4-week range.
- Since the 4-week trading range had 3 legs up, it is a wedge. Traders should expect at least a small 2nd leg sideways to down after a 1- to 3-day bounce.
- If there is a lower high and a 2nd leg down, there will be a lower high major trend reversal. That would have a 40% chance of leading to a 10% correction.
- Is this the start of a 10% correction? Unless the bears get follow-through selling today, or a strong reversal down from a lower high this week or next, the odds will continue to favor a new high after every 1- to 3-day selloff.
- But the odds are also that one of these brief selloffs will grow into a 10 – 20% correction this summer. The correction will not be clear until it is about half over.
Consecutive outside bars on weekly Globex chart
- On weekly chart, this week so far is a big bear trend bar and it broke below last week’s low.
- On the weekly Globex chart, this week is an outside down bar, and last week was an outside up bar. Consecutive outside bars is an OO (outside-outside) pattern.
- That is a Breakout Mode pattern. Since it is coming in an overbought market, it increases the odds of lower prices if the Emini trades below this week’s low at any point in the next several weeks.
- Since there is now an OO on the weekly chart, traders will pay a lot of attention to the rest of the week and to next week. If this week closes near its low and then next week breaks below this week’s low, the odds will shift in favor of a 10% corrections.
Overnight Emini Globex trading on 5-minute chart
- Down 27 points in the Globex session, but sharp reversal up in past 15 minutes from sell climax to below the 4,100 Big Round Number.
- Traders are deciding if the yearlong bull trend is beginning a leg down over the next month or two.
- If it is, the bears will create surprises. That means they will do things that are unexpectedly strong.
- For example, today might become a big bear day closing far below the 4-week trading range.
- Or, this week could close far below last week’s low.
- Until the bears clearly take control, the odds will continue to favor new highs before there is a 10% correction.
- Yesterday reversed up but then entered a trading range.
- Today will probably gap below that range, but it will probably not gap below yesterday’s low.
- Because the 2-day selloff was surprisingly strong and at support, there is an increased chance of a trend day in either direction.
- Trading range trading is always more likely than trends. Yesterday went sideways after a strong selloff down to support. That increases the chance of it going sideways again today.
- Traders might wait until the end of the week to decide if this is the start of a 10% correction, or just another pullback in the yearlong bull trend.
- If there is a series of strong trend bars up or down on the open, the odds of a trend day will go up.
Yesterday’s Emini setups
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- Overnight selloff after buy climax. Traders are deciding if it is just brief pullback in bull trend or trend reversal down. Today’s close will help traders decide.
- Turning down from micro double top and wedge rally, to a double top with February 25 high.
- If today closes near its low, selloff will probably reach May 5 low, which is bottom of last week’s buy climax, and bottom of 4-week trading range.
- Since last week’s rally was strong, if today closes in middle of range or above middle, bulls will probably get at least one more leg up to Feb 25 high.
Overnight EURUSD Forex trading on 5-minute chart
- Sold off overnight, but big reversal up in past 10 minutes. Now, in middle of day’s range.
- Sell climax and reversal up were strong enough for this to be low for rest of day.
- Bears need today to reverse back down and close near low of day, but currently have only 40% chance.
- Bulls want today to close in the middle of the range, or near the high of the day. That will increase the chance of today being just a pullback in the 6-week rally.
- At the moment, the bulls are winning and day traders are buying aggressively.
- Bulls want today to close here or higher, but Big Down, Big Up creates Big Confusion. That typically leads to a trading range. Therefore, day traders will expect the bull trend reversal to either weaken into a bull channel or evolve into a trading range.
- If there is a 20-pip pullback, day traders will again sell, but probably only for scalps.
- Today will probably be sideways or up for the rest of the day.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
- Low 2 bear flag on open, but higher probability to sell below bear bar closing near its low.
- Small Pullback Bear Trend, and it broke far below 4-week trading range.
- On daily chart, big gap above April 1 high is strong magnet below.
- There is a gap below the April low on the monthly and weekly charts, and it is a magnet below.
- Sell climax day today so 75% chance tomorrow will have at least a couple hours of sideways to up trading that starts by the end of the 2nd hour.
- This week is an outside down week and an OO top on the weekly Globex chart. The bears want the week to close far below last week’s low, which would increase the chance of lower prices next week
- Bulls want Friday to close above bottom of 4-week trading range, which is the April 20 low of 4,110.50, but they will need strong rally over next 2 days.
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 Time
When I mention time, it is USA Pacific Time (the Emini day session opens at 6:30 am PT, and closes at 1:15 pm PT). You can read background information on the intraday market reports on the Market Update page.