Emini and Forex Trading Update:
Monday June 3, 2019
I will update again at the end of the day.
Pre-Open market analysis
Today is the 1st day of June. May was an outside down month and a double top. The bears want June to trade below the May low to trigger the monthly sell signal. If they are successful, the odds favor only another month or two down because the 2019 rally was strong and the monthly chart is in a trading range.
When a signal triggers on a higher time frame, there is usually a pullback beyond the breakout point. Consequently, if today trades below May’s low, the odds favor a rally to back above the May low. It can happen today or it could take a week or two. Traders will then decide if the sell signal will fail or succeed.
Since the bulls always want the opposite, they hope that June closes near its high. It would therefore be a buy signal bar on the monthly chart for July. They want any breakout below the May low to reverse up.
The daily chart has been in a tight bear channel for a few weeks. In addition, it has had 4 small legs down. This is therefore a parabolic wedge selloff. Since that is a sell climax, it increases the chance of a bounce this week.
However, the momentum down over the past month is good enough to make sideways to lower prices likely over the next few weeks. Traders will sell a 2 – 3 day rally, betting that the selloff will reach the targets below.
Most days over the past month have had both at least one swing up and one swing down. That increases the chance of another mostly trading range day today.
Overnight Emini Globex trading
The Emini is down 8 points on the Globex chart. If the day session opens here, it will trigger a monthly sell signal. Furthermore, there will be a gap down on the weekly and monthly charts. Gaps on the monthly chart are rare. Furthermore, small gaps typically close in the 1st hour. Consequently, if there is a gap down, there is an increased chance of a rally in the 1st hour.
Since there is a parabolic wedge sell climax on the daily chart, there is an increased chance of a 2 – 3 day rally this week. In addition, the daily chart is at the bottom of that tight bear channel. Since the bottom of the channel is support, there is a reduced chance of a big bear trend day today.
Finally, most days over the past month have had swings up and down. Traders will assume that today will also have a lot of trading range price action unless they see a strong trend up or down.
EURUSD Forex market trading strategies
The EURUSD daily Forex chart has been in a weak bear channel for a year. For the past month, it has been in a triangle. It has rallied for 3 days but the bars are not big and there is no breakout yet. This is a Breakout Mode pattern. That means there is a 50% chance that the 1st breakout up or down will reverse and a 50% chance that a successful breakout will be up or down.
Because a bear channel is a bull flag, traders should expect a rally lasting several months at some point. However, there is a 50% chance that there will first be a sharp breakout below the bottom of the yearlong bear channel first. If that were to happen, traders will look for a reversal setup. If they get one, they could be buying the bottom of a rally that would probably last many months.
Until then, traders will continue to look for 2 – 3 week rallies and selloffs that reverse. There is no sign that this is about to change.
Profit-taking is US Bonds could lead to a bounce in the EURUSD Forex market
The US bond market is in a buy climax and Friday’s extreme rally will probably attract some profit-taking. US Treasuries have been in a flight-to-quality rally. If traders begin to wonder that it might be ending, they will take profits in US bonds and begin to put money elsewhere. That includes Europe. If people are more willing to buy Euros, the profit-taking in the US bond market could lead to a 2 – 3 week rally in the EURUSD Forex market.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart has rallied for 3 days and it is 40 pips above the overnight low. The bars are not big, and the rally so far looks minor.
The rally is now testing the bear trend line at the top of the month-long triangle. Because the overnight pullbacks have only been 15 pips, the bears are not yet making money. Day traders are buying for scalps.
If the bulls begin to create bigger bars closing on their highs and consecutive big bull bars, they will be more willing to swing trade. Their next target is last week’s high of 1.1215, and then the top of the triangle at the May high.
The bears need the overnight rally to stop. Because it is now at the daily bear trend line, they will start to look for sell setups on the 5 minute chart. Once the 5 minute chart transitions into a trading range, the bears will begin to sell at prior intraday highs and on reversals down. However, with small bars and small legs, they, too, will only scalp. Swing traders need bigger bars and bigger legs.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
The Emini triggered a monthly sell signal by trading below the May low today. However, it had violent swings up and down around that May low all day.
The price is clearly important. Traders are deciding if the sell signal will lead to a swing down or if it will fail. The February 11 gap is a magnet just below today’s low. I have been saying for 2 months that it is a target below. It might close tomorrow.
However, there is a parabolic wedge sell climax on the daily chart. This increases the chance of a bounce this week before the gap is filled. If there is a bounce, it will probably be minor. Odds favor at least slightly lower prices within a few weeks. This is especially true after so many tech stocks had surprisingly big selloffs today.
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.