Emini and Forex Trading Update:
Monday April 22, 2019
I will update again at the end of the day.
Pre-Open market analysis
Most days over the past 3 weeks sold off and then reversed up. Thursday was another example. That reversal at the end of the week converted a developing strong bear bar on the weekly chart into a bear doji bar. Last week is now a weak sell signal bar on the weekly chart.
Thursday is a buy signal bar on the daily chart. But it is a bear doji and it followed a big bear bar. Since that is a weak buy setup, there will probably be more sellers than buyers above its high.
The 60 minute chart has been in a Small Pullback Bull Trend for about 100 bars. Since that is unusual, it is unsustainable and climactic. The odds favor a conversion into a trading range. That might have begun with Wednesday’s selloff. Traders will find out this week.
At the moment, the odds favor a 2nd leg down on the 60 minute chart. When a Small Pullback Bull Trend converts into a trading range, it does so with a bigger pullback. Typically, one that is about twice as big as the biggest pullback in the trend. Therefore, the odds slightly favor about a 40 – 50 point pullback this week.
But, the bull trend has been exceptionally strong. The Emini could easily continue up to the all-time high without a bigger pullback. What happens over the next couple of days should tell traders which outcome is more likely.
Overnight Emini Globex trading
The Emini is down 9 points in the Globex session. Because of the 60 minute chart’s buy climax, the odds favor at least a 50 point pullback this week. It could come in the form of one or more big bear trend days or in a channel that just drifts down. Wednesday might have been a bear spike in a spike and channel bear trend on the 60 minute chart.
With most of the days over the past 3 weeks having swings up and down and lots of overlapping days, a channel down is more likely than a collapse. This means that the 5 minute chart will probably continue to have lots of trading range days, but begin to form lower highs and lows.
There is always a bull case, especially with the daily chart being in a strong bull trend. The bulls obviously want a strong break above the all-time high. Bull trends often have unusually big bull bars late in the trend. They typically are exhaustive and lead to a pullback. However, day traders should be aware that there is always an increased chance of a big bull day when the daily chart is in a bull trend.
EURUSD Forex market trading strategies
The EURUSD daily Forex chart sold off strongly on Thursday but formed a bull inside bar on Friday. Friday is a buy signal bar for a failed bear breakout. The bulls see Thursday as another test of the bottom of the 5 month trading range.
But this one is forming a special pattern. It is a Double Bottom Pullback and a higher low major trend reversal. The bulls needed a bull bar closing on its high on Friday and got it. Next, they needed today to trade above Friday’s high. They got that as well. Finally, they need a reversal up this week.
The bears hope that Friday and yesterday will form a bear flag below the 20 day EMA. They then want a break below the double bottom. Finally, they need consecutive closes below the double bottom. They would prefer to have closes far below the trading range. If they get all of this, traders will conclude that the 5 month trading range has ended and the 2018 bear trend is resuming.
However, trading ranges resist breaking out. I have made this point many times over the past 5 months. I keep saying that reversals are more likely than breakouts. That is still the case.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart traded above Friday’s high and therefore triggered a buy signal today. It would be better for the bulls if today closes near its high and above Friday’s high.
Sometimes a successful buy signal immediately forms a big bull bar. At other times, it forms a few small bars and then a big bull trend day. In either case, there is an increased chance of one or more big bull trend days this week.
The bears need to prevent the bulls from getting bull bars on the daily chart. They therefore will sell whenever the chart is at a prior high on the 5 minute chart. They need to form bear trend bars on the daily chart or at least bars that close below their midpoints. That would lead to a credible sell signal bar on the daily chart. They then will try to get one or more big bear trend days that break below the March low.
While the overnight rally has only been 30 pips, it has been in a tight bull channel. This is good for the bulls. It makes it hard for bears to make money. It therefore increases the chance that the daily chart is reversing up.
As long as the 5 minute chart continues in a tight bull channel today, day traders will only buy. Day traders will buy for scalps and traders on the daily chart will buy for a reversal up. The bears need to stop the buying and create a trading range. If they are successful, day traders will begin to sell for scalps today.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
The Emini gapped down on the 5 minute chart. After rallying to the 60 minute EMA, it entered a tight trading range. The bull trend resumed up at the end of the day. By going above Thursday’s high, the Emini triggered a High 1 bull flag buy signal on the daily chart.
Last week reversed down from a nested wedge top on the 60 minute chart. Typically, there is a 2nd leg down. Traders will find out tomorrow or Wednesday if the bull trend on the daily chart is resuming or a 2nd leg down on the 6 minute chart will begin.
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.