Emini and Forex Trading Update:
Monday December 9, 2019
I will update again at the end of the day.
Pre-Open market analysis
The Emini sold off 85 points and reversed back up last week. I said throughout November that a 50 – 100 point pullback was likely, and last week probably was it. The bulls want a resumption of the bull trend through the rest of the year. However, the bears want a double top with the high of 2 weeks ago.
Since the Emini raced up to that high and not far above, it might pause here for a few days. This is especially true with the uncertainty over Wednesday’s FOMC announcement. However, the odds still favor higher prices over the next month or two.
Overnight Emini Globex trading
The Emini is down 3 points in the Globex session. The 4 day rally was not especially strong. Traders wonder if it was simply a buy vacuum test of the all-time high from 2 weeks ago. The bears want a double top and then a reversal down.
However, the bulls see last week’s selloff as a bear trap. They want a break to a new all-time high. Furthermore, they want the year to close on its high.
The momentum up on the daily, weekly, and monthly charts gives the bulls a slight advantage over the remaining weeks of 2019. But Wednesday’s FOMC announcement and next week’s announcement on China tariffs are catalysts. They have the potential to create a big move up or down.
With last week racing up to the high from 2 weeks ago but unable to break above that resistance, and with upcoming catalysts, there is an increased chance of trading range price action for a few days.
EURUSD Forex market trading strategies
The daily chart of the EURUSD Forex market has been in a trading range for 5 weeks. It is therefore in Breakout Mode. Furthermore, this trading range is in the middle of a bigger 5 month trading range.
While the EURUSD sold off on Friday, its direction over the next month is still not clear. Traders see the tail on the bottom of Friday’s candlestick as a sign of uncertainty. Also, Friday closed just above the 20 day EMA and not below.
The bears hope that Friday is the start of a reversal down from a failed breakout above the range. However, the bulls see Friday as a pullback from what will be a successful breakout above the 5 week trading range.
Because the October rally was the strongest one in 2 years on the weekly chart, it is more likely that the EURUSD will get a 2nd leg up. The bulls hope it began 2 weeks ago. Their targets are the 14 month bear trend line and the October high. Both are around the magnet of the 1.12 Big Round Number.
With the EURUSD in the middle of its 5 week trading range and with both a double top and a double bottom, the probability of a successful breakout is about the same for the bulls and bears. But because of the October rally, it is slightly higher for the bulls.
Upcoming catalysts for a breakout are this week’s FOMC report, next week’s China tariff announcement, and most importantly, the Brexit decision. That could be months away.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market rallied 25 pips overnight from the daily EMA. The bulls are trying to erase Friday’s selloff. They want today to be a good buy signal bar for tomorrow. That would require a close near today’s high.
Can today break strongly above Friday’s high? Unlikely because Friday was a big bear day and its high is at the top of the 5 week trading range. That limits the upside for today.
Can today reverse down? Even if it does, it will likely find support around the open of the day and at the daily EMA.
With limited upside and downside, today will probably be a trading range day. The bulls will buy dips and try to get today to close near its high. The bears will sell rallies and try to get today to close below the open of the day and below the 20 day EMA. The context on the daily chart is slightly better for the bulls and therefore today has a slightly bullish bias on the 5 minute chart.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
The Emini rallied on the open, but then reversed down in an Endless Pullback and Small Pullback Bear Trend. The bears are hoping that Friday will form a double top with the all-time high from 2 weeks ago. They also want a 2nd leg sideways to down after last Monday’s Bear Surprise bar.
Today is a sell signal bar for the double top. A gap down tomorrow would form a 2 day island top. But island tops are minor patterns. For example, there was both a 5 day island top and a 1 day island bottom last week.
The bulls want the year to close at a new high. However, they are stuck at the resistance of the high from 2 weeks ago.
Traders might be waiting for Wednesday’s FOMC announcement before creating a breakout up or down.
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 Market Update page.