Emini and Forex Trading Update:
Wednesday May 15, 2019
I will update again at the end of the day.
Pre-Open market analysis
Yesterday rallied in a Small Pullback Bull Trend. In addition, Monday was a big bear day and yesterday opened near Monday’s high. This is a buy signal, similar to January 4. However, these 2 bars are small and have prominent tails. Furthermore, the 3 week bear channel is tight. This is a weak buy setup..
Will this lead to a huge rally, like in January? No. The context is different and the bars are weaker. That was after a crash down to the 10 year bull trend line. This is a 3 week bull flag late in a bull trend and the Emini probably has been in a trading range since early March.
The bulls will need a double bottom before they can get a new all-time high. Consequently, if the Emini rallies for 3 – 5 days, it will probably form a lower high around Friday’s high.
However, the odds still favor a new all-time high this summer. This is true even if the pullback continues down to close the gap above the February 8 high at 2686.25.
Bear channel will probably evolve into small trading range soon
There have been 6 legs down in the bear channel on the 60 minute chart since the May 1 high. That is unusual. Unusual means unsustainable. Therefore, traders expect a change in the price action soon.
When there is a bear channel, there is only a 25% chance of a bear breakout and an acceleration down. More often, there is a break above the bear trend line and then a transition into a trading range.
This will probably happen over the next week. Consequently, the bulls will look for a reversal up from around Monday’s low.
Less likely, there will be a series of big bear bars closing below that low. If that happens, traders will look for a 150 point measured move down.
Overnight Emini Globex trading
The Emini is down 20 points in the Globex session. The bulls hope that the 2 day rally will form a higher low today and they then want the Emini to rally for several days.
The bears will continue to sell rallies, betting on a continuation of the 3 week bear channel. In addition, if they can get a strong break below Monday’s low, they might make the bulls give up. If they give up, there can be a big bear trend day.
Today will probably be like most days over the past month and have at least one swing up and down. Also, because the 2 day rally was big, the Emini will probably begin to form a trading range on the 60 minute chart.
Therefore, after a big gap down today, the bulls will look for a reversal up within the 1st couple of hours. Less likely, the big gap down will be the start of a big bear trend day.
When there is a big gap up or down, there is an 80% chance of a trading range for the first hour. Then, the bulls look for a double bottom or wedge bottom for an early low of the day. The bears want a double top or wedge bear flag near the EMA and then a swing down.
EURUSD Forex market trading strategies
The EURUSD daily Forex chart has sold off for 3 days from a double top bear flag in a yearlong bear channel. However, there have been many bull bars over the past 3 weeks. In addition, the rally from the low was smaller and had few bars than most prior bear rallies. Consequently, there is still at least a 50% chance of a test of the April 12 high before a new low.
But, even if the bulls get their rally, the bear channel is still in effect. That means the odds continue to favor new lows after every 2 – 3 week rally. This will continue until the bulls get a strong breakout above a major lower high. The most recent is the March 20 high.
At some point, the bulls will achieve their goal. Then, the bear trend will have evolved into a trading range. The bulls will need several strong rallies with higher highs and lows before traders will conclude that a bull trend is underway.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart sold off 40 pips in a tight bear channel over the past 4 hours. Bears are selling small bounces. Because the channel is tight, cannot make money. They are waiting for the bears to begin to take profits. This will result in a trading range. At that point, the bulls will begin to buy for scalps.
I mentioned yesterday that this week might form an outside down bar on the weekly chart. It reversed down from above last week’s high and last week’s low is only 11 pips below today’s current low. That is a magnet for the rest of the week.
Because the daily chart has been in a tight range for 3 weeks, traders are looking to buy selloffs, sell rallies, and take quick profits. Therefore, there probably will be buyers around last week’s low.
The legs up and down have been small. It has been difficult for day traders to make more than 20 pips on any trade. There is no sign that this is about to end.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
The Emini reversed up from below yesterday’s low. By breaking above yesterday’s high, today was an outside up day. This is the 2nd one in the past week. The odds now favor 2 – 5 days up. There is an increased chance of a gap up and bull trend tomorrow. However, there will probably be a 2nd leg sideways to down before there is a new all-time high.
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.