Emini and Forex Trading Update:
Wednesday April 1, 2020
I will update again at the end of the day.
Pre-Open market analysis
By going above last week’s high yesterday, the Emini triggered a weekly buy signal. But since last week had a big tail on top and the bear trend was so strong, the buy setup was weak. That means traders suspected that there might be more sellers than buyers above last week’s high. Yesterday reversed down after going just barely above last week’s high.
After 6 days without a pullback, the Emini is overbought. Traders expected a pullback today. The selling began yesterday once traders saw that the Emini was failing to get far above last week’s high. They expect about a 50% pullback ahead of Friday’s horrendous unemployment report.
Today’s gap down will trigger a sell signal on the daily chart. The bears see the rally as just a test of the 20 day EMA in a bear trend.
However, because the 5 day rally has been strong, there will probably be buyers at around a 50% retracement of last week’s rally.
Overnight Emini Globex trading
After a 6 day bull micro channel, today was likely to trade below yesterday’s low and begin a 2 – 5 day pullback. When traders saw yesterday that the Emini was unable to break strongly above last week’s high, they sold. The selling continued overnight.
The Emini is down 92 points in the Globex session and it will probably open with a big gap down today. When there is a big gap down, the Emini is far below the EMA on the 5 minute chart. Day traders do not want to sell far below the average price.
This results in an hour or two of trading range price action 80% of the time. The bulls will look for a double bottom or wedge bottom for a swing up. The bears want a wedge top or double top around the EMA for a swing down. When there is an early trading range, there is a reduced chance of a strong trend day. A trend typically will reverse or enter a trading range after a few hours.
Traders know that the Emini can trend strongly at any time. But experienced traders know that there is only a 20% chance of a big bull or bear trend day when there is a big gap down.
EURUSD Forex market trading strategies
The daily chart of the EURUSD Forex market rallied for 6 days to the middle of its expanding triangle. The rally was a buy climax and a test of the EMA and the March 16 lower high. Because it was extreme, it was a buy climax. The bulls are taking some profits and the bears are selling. Both are betting on a 2 – 5 day pullback.
Traders expect at least a small 2nd leg up to test last week’s high. Since the EURUSD is in the middle of a trading range, traders are looking for reversals every few days.
March was almost a perfect doji on the monthly chart (not shown). It was a huge doji, but the month closed in the middle of an 8 month trading range. There is no evidence that the EURUSD is likely to successfully break out of the top or bottom this month. Traders are expecting more trading range price action.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market sold off strongly for a couple hours at the start of the European session, but then went sideways once it broke sightly below yesterday’s low. It has been in a tight trading range for 3 hours. The range has been so tight that it has been difficult for scalpers to make even 10 pips.
Because the trading range is after a bear trend, trend resumption down is slightly more likely than a trend reversal up. But it is important to recognize that a market cannot be in a tight trading range unless the bulls and bears are equally strong. While the bears have slightly higher probability of a successful breakout, the odds are still close to 50 – 50.
Furthermore, a tight range late in a bear trend is typically the Final Bear Flag. Consequently, even if the bears get their breakout, it probably will not get far. There will usually soon be a reversal back into the range. That reversal often continues far above the range.
Traders assume the market will not fall much further today. There is a slightly increased chance of a rally whether or not there is a bear breakout first. Currently, day traders are scalping, but most should wait for a breakout up or down.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
Today formed a broad bear channel. The bears see today as the resumption of the bear trend on the daily chart after a test of the 20 day EMA.
But, today was climactic and there was a strong reversal up into the close from a wedge bottom. Also, after a 7 day bull micro channel, the bulls want a 2nd leg sideways to up. They hope that today’s late reversal is the start.
However, the Emini might be sideways tomorrow after today’s sell climax and ahead of Friday’s unemployment report. Everyone knows the report will be horrendous. What no on knows is how the market will respond. Traders should expect a big move up or down on Friday.
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.