Emini and Forex Trading Update:
Monday October 19, 2020
I will update again at the end of the day.
Pre-Open market analysis
Friday closed on its low and it is a sell signal bar for today, a micro double top. However, it had a small bear body and a big tail below. That is a weak sell signal bar. Also, it followed a strong 4-day rally the week before. This is only a minor sell setup. If today trades below Friday’s low and triggers the sell signal, there will probably be buyers below.
The bulls want a resumption of the breakout above the September 16/October 6 double top. But because the 3-day selloff was steep, many traders expect at least a small 2nd leg down.
Since the chart has been in a a trading range for 3 months, traders know that a pullback from a breakout usually dips below the breakout point. Therefore, the daily chart might have to dip below the October 6 high before the bulls will lift it above the October 12 high.
Overnight Emini Globex trading
The Emini is up 26 points in the Globex session. It will therefore gap far above Friday’s close.
A big gap up means the Emini will be far above the 20 bar EMA. That is a measure of the average price. Traders do not like to pay far above average unless they are buying something that is far above average. Many bulls will only buy on the open if there are a couple big bull bars closing on their highs.
More likely, the Emini will enter a trading range for at least an hour or two. The bears will look to sell a wedge rally or a double top in the 1st couple hours for a swing down to the EMA. The bulls will wait until the chart gets near the EMA before buying. They want to see either a double bottom or a wedge bottom near the EMA.
Friday’s range was big and today will open in the middle 3rd of that range. Friday had a Big Down move and today’s open is a Big Up move. That creates Big Confusion. There is also confusion on the daily chart, which has been in a trading range for 2 months. This increases the chance of a sideways day today. There will probably be sellers around Friday’s high and buyers around Friday’s low.
While a trading range day is likely today, the overnight range is big as are the recent bars on the daily chart. Therefore, there will likely be at least one swing up and one swing down today.
EURUSD Forex market trading strategies
The EURUSD Forex market on the daily chart has been in a trading range for 3 months after a buy climax. It is therefore currently also in an early bear trend and an early resumption of the 4-month bull trend. Traders see the chart as being in Breakout Mode. They are looking for reversals every week or two as they wait for a successful breakout.
Today so far is a big bull bar. The EURUSD rallied from a double bottom bull flag with the September 30 low. That low was the start of a small wedge rally and therefore a magnet.
If today closes near its high, it will increase the chance of higher prices tomorrow. Traders will look for a test of the October 9 lower high.
A more important lower high is September 9. A bear trend needs lower highs. A break above that high would end the series of lower highs and therefore end the bear trend. The chart would then be in both a trading range and a bull trend.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market rallied strongly overnight. Day traders have only been buying, mostly for a swing up.
Because the rally has been climactic, the bulls will begin to take profits. If there is a 20 to 30-pip pullback, day traders will switch to buying selloffs for scalps and selling reversals down for scalps. This will probably begin within an hour because the 5 minute chart is extremely climactic and the day’s range is already fairly big.
Can today reverse down? Probably not. If it does, it will typically have to stop going up and enter a trading range for a couple hours first. The best the bears can reasonably hope to achieve is getting the day to close 20 – 30 pips down from the high. That would make tomorrow more likely to be sideways than up.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
The Emini gapped up, but then sold off to below Friday’s low. That triggered a sell signal on the daily chart. It continued down to below last week’s low, which triggered a weekly sell signal for a double top.
Finally, the Emini fell below the September 16 high. I wrote over the weekend that this was likely at some point this week. If the rally from the September 16 high was going to be a wedge, traders expected this week’s selloff to go below that high before the Emini reversed up.
Where does the Emini go from here? While it could go a little lower, there will likely be buyers not far below the September 16 low. Therefore, there will probably not be much more down this week.
This is true unless, of course, the double top on the weekly chart has taken control. Then the Emini could continue down for a couple months. It is currently more likely that it will bounce by the end of this week for a test of last week’s high, but 2 or 3 consecutive big bear days will make the bear case more likely.
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.