Emini and Forex Trading Update:
Monday November 4, 2019
I will update again at the end of the day.
Pre-Open market analysis
The Emini gapped up on Friday. This was a gap up on the monthly chart as well as on the daily chart. Gaps on the monthly chart rarely stay open. Consequently, there will probably be a pullback below Thursday’s high soon. But “soon” could be 5 – 10 bars, which is many months on the monthly chart.
October was an outside up bar in a bull trend on the monthly chart. Friday triggered the buy signal by going above the October high. Traders therefore expect higher prices over the next month or two.
What about today? Friday was a bull bar on the daily chart and it broke above the 21 month trading range. The bulls need follow-through buying to convince traders that the breakout will succeed. They should get it this week. However, when the Emini breaks above major resistance, it often soon goes sideways for a day or two before continuing up.
The bears want the breakout above the July high to fail. But they will need a good sell signal bar on the daily chart before traders will consider that possibility. That means the bears need one or more days closing near their lows.
Even if they get it, the trend up is strong on all time frames. Traders will buy the 1st reversal down. There is not much downside risk over the next few weeks.
Overnight Emini Globex trading
The Emini is up 18 points in the Globex session. It will therefore probably gap up on the day session. With last week’s gap up on the monthly chart and the strong breakout on the weekly chart, the Emini should work higher for a month or two. When there is a strong breakout, there is an increased chance of bull days closing near their highs on the daily chart. As a result, traders expect either a bull trend day or a late reversal up with today closing near its high.
A bull breakout is a buy climax. Profit taking can begin at any time. Day traders therefore will be ready for an occasional bear trend day. But with the higher time frame charts in a bull breakout, even if there is a 3 hour selloff on the 5 minute chart, there is an increased chance of a late rally. The odds are against a strong bear trend day.
EURUSD Forex market trading strategies
The EURUSD weekly Forex chart (not shown) had a bull inside bar last week. It is a buy signal bar for this week. Today got to within a fraction of a pip of going above last week’s high and triggering the buy signal, but instead reversed down.
On the daily chart, a reversal down from here would form a double top with the October 21 high. I have been saying that last week’s rally lacked consecutive big bull bars. It therefore was more likely to be a bull leg in a developing trading range than the start of a bull trend. If today closes near its low, today will be a sell signal bar for the double top.
Will the bear trend resume? Since this rally was the strongest one on the weekly chart since the bear trend began 22 months ago, the bears will probably not be able to get a new low for many weeks. More likely, any selloff over the next few weeks will end up as a bear leg in the trading range that began on October 1.
Since the EURUSD daily Forex chart is again stalling just below 1.12, this is a credible top of the range. But the bear trend line and the August highs are only 70 pips above the double top. Consequently, even if tomorrow goes below today’s low and triggers the double top sell signal, the selloff might be brief. There might be enough bulls below to continue the rally up to the next resistance level before there is a test of the October 25 low.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart sold off on the open of the European session from just below last week’s high with 3 big bear bars. That is a credible high of the day. While the 5 minute chart bounced after that selloff, the chart has been in a 20 pip range since. Day traders have been scalping. The objective for the bears is a close near the low. They do not need today’s range to get any bigger. Therefore, there is a lack on an incentive to create a big bear day.
The bulls want today to go above last week’s high to trigger the weekly buy signal. But the lack of energy so far makes a big bull trend day unlikely as well. The bulls will be satisfied by simply having the day close 10 – 20 pips above they low. They do not want the bears to have a strong sell signal bar on the daily chart. If the bulls succeed, there would be an increased chance of buyers overwhelming sellers tomorrow below today’s low.
With so much trading range price action for 2 weeks and not much incentive for either a big rally or selloff, today will probably remain a trading range day. The bull day traders will buy near the low and try to get today to close above the middle of the range. The bear day traders will sell rallies and try to get today to close near its low.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
The Emini gapped up again today, but then went sideways for most of the day, like so many days over the past month. Because there was a series of lower highs, today was also a broad bear channel.
Since the October low, there has been a 1 – 2 day pullback after every 3 – 5 days. Today’s late selloff turned today into a credible sell signal bar on the daily chart. Traders should expect 1 – 3 day pullback, probably starting tomorrow or Wednesday. However, the bulls will look to buy it, like they did with all of the prior pullbacks.
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.