Emini and Forex Trading Update:
Friday December 4, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini yesterday made another new all-time high, but closed below the old high. However, it closed 1 tick above yesterday’s close, and therefore made a new all-time highest close. This is a subtle sign of strong bulls and it reduces the chance of a big selloff today.
There are now 3 legs up from the November 19 low. A reversal down from here would be from a wedge top. Since yesterday was a bull doji bar, it is a weak sell signal bar. But with the bad bull flags on the weekly and monthly charts, traders should be prepared for a reversal down some time in December or early January. There could be a dramatic 1 to 3-day buy climax (blow–off top) before the reversal down begins.
Is yesterday’s wedge top the start of a selloff? The 10-day bull channel has been tight and there were no strong bear bars in the rally. Therefore, a reversal down would probably just be another 1 to 2-day pullback in a 2-week Small Pullback Bull Trend instead of the start of a reversal down. Traders continue to expect higher prices, fully aware that a profit-taking selloff can start at any time, and that one will probably come in December.
Today is Friday and therefore weekly support and resistance can be important. There is no significant nearby weekly resistance. But the bulls would like the week to close on its high and above last week’s high. That would increase the chance of higher prices next week.
The bears would like this week to have a bear body on the weekly chart. However, the open of the week is more than 40 points down from yesterday’s close. That might be too far to reach today. At a minimum, they would like this week to close at least 20 points below this week’s high. That would put a conspicuous tail on the top of this week’s candlestick and slightly reduce the chance of higher prices next week.
Overnight Emini Globex trading
The Emini is unchanged in the Globex session. Yesterday was an expanding triangle on the 5-minute chart. Today is opening in the middle of that trading range. Most days for over a month have had a lot of trading range price action. Furthermore, the majority closed either in the middle of their range or near the open. Day traders expect that again today.
If there is a series of strong trend bars, they will look for a possible trend day. But with most days lately having reversals, they will look for any swing to end within 1 – 3 hours, and then either enter a trading range or reverse.
Today is Friday and therefore weekly support and resistance can be important, especially in the final hour. The most important downside magnets (support) are last week’s high and the open of the week. The bulls want the week to close at a new all-time high.
EURUSD Forex market trading strategies
The EURUSD Forex market on the daily chart has broken strongly above a 4-month trading range. Traders expect at least a 2nd leg up. They therefore will buy the 1st reversal down.
When a strong breakout reaches resistance, traders begin to take some profits. The EURUSD is at a measured move projection based on the September 25/November 4 double bottom. Yesterday’s bar has a tail on top, which is a sign of minor profit-taking.
There are other measured move targets above. When there are several ways to draw the projections, there is no consensus. That makes the targets less important resistance.
The most important resistance is the February 2018 lower high above 1.25 (not shown). There will be a pullback before the EURUSD gets there. The pullback could dip below the September 1 high, which is the breakout point of this week’s rally.
However, when a rally is as strong as this one has been, traders are eager to buy. Many will buy as soon as the EURUSD dips below the low of the prior day. The 1st pullback usually lasts only 1 – 3 days.
But after there is a 2nd leg up, if there is then a reversal down, there will be a double top. The bears would then have a better chance of a pullback lasting a week or two. Regardless, traders will buy it. They expect a test of 1.25 sometime next year.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market has had a lot of trading range trading overnight. It reversed down from above yesterday’s high. Yesterday reversed down into the close at a measured move target on the daily chart.
This is minor profit taking. Since the daily chart is strongly bullish, day traders are buying pullbacks for scalps. Now that yesterday had been a 40-pip reversal down, they are also looking to sell reversals down for scalps.
Can today be a big bear trend day? Probably not. A strong bull trend typically evolves into a trading range before it can reverse into a bear trend. Therefore, today will likely simply continue yesterday’s trading range. Day traders expect to look to buy reversals up and sell reversals down. But if there is a series of strong trend bars in either direction, they will swing trade.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
Today began with a Bull Trend From The Open, but it then went sideways, as it often does after a climactic open. If worked higher in the final hour and the day, but reversed down from the 3700 Big Round Number.
With the week closing near its high and at a new all-time high, traders expect higher prices on Monday. It also increases the chance of a gap up on Monday, which would create a gap on the weekly chart.
But while there is no top yet, the Emini will probably have a reversal down at some point in December. In the meantime, traders continue to buy.
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.