Emini and Forex Trading Update:
Wednesday April 17, 2019
I will update again at the end of the day.
Pre-Open market analysis
I have been saying that last Thursday’s gap up might be a measuring gap. Yesterday sold off after gapping up to the 2920 target area. But, it reversed up late in the day.
On the daily chart, yesterday closed below its midpoint. It is therefore a sell signal bar in a buy climax. There were 3 small pushes up over the past 7 days so there is a small wedge top.
However, because the 3 week bull channel is tight, if there is a selloff today, it will probably be minor. Also, the tail on the bottom of the yesterday’s bar makes it a weaker sell signal bar. Finally, the Emini is close enough to the all-time high that it is within its gravitational field. The Emini might have to reach the magnet before it can pull back.
The 60 minute chart has been in a tight bull channel for about 100 bars. That is unsustainable and therefore a buy climax. Typically, there will soon be a pullback that is approximately twice as big as the biggest pullback in the rally. Since that was about 20 points, traders will expect a 40 – 50 point pullback starting within a week. That target would correspond to last week’s low and the 20 day EMA.
Buy vacuum test of all-time high
Everyone sees the Emini getting vacuumed up to the 2956.00 all-time high. The rally is climactic. Therefore, at some point, the bulls will take profits. Once they do, the bull trend will probably convert into a trading range for 1 – 2 weeks.
That might come only after the Emini gets up to the old high. It is common for a rally to go sideways once it tests an important prior high. The bulls who bought lower take profits and the bulls who bought at the prior high are relieved to be able to sell out without a loss.
Traders then decide between a double top and a successful breakout to a much higher price. Less likely, it will break strongly above the old high without pausing or reverse down abruptly without going sideways first.
Overnight Emini Globex trading
The Emini is up 7 points in the Globex session. Most days over the past 3 weeks have sold off and then reversed up. This has resulted in a continuation of the 4 week rally. Day traders therefore are looking for every sharp selloff to reverse up.
They will trade that way until one doesn’t. They need to see a relentless selloff with follow-through selling for 1 – 3 more days before they will believe that a bear leg has begun on the daily chart.
In addition to lots of bull reversals for several weeks, the Emini has also spent a lot of time in tight trading ranges. This is good for day traders who want to scalp with limit orders.
However, it reduces the number of reliable stop entries. Day traders have to patiently wait for strong signal bars and good patterns. Every day has had at least one swing and most days have had at least 2. This should continue.
EURUSD Forex market trading strategies
The EURUSD daily Forex chart has rallied for 3 weeks in a tight bull channel. However, it has been sideways for 4 days. Yesterday was an inside day and therefore a buy signal bar on the daily chart.
But, it had a bear body. Therefore, it is a weak buy setup. Consequently, there might be more sellers than buyers above its high. Today broke above yesterday’s high, which triggered the buy signal. However, it has pulled back below the high.
The daily chart has been sideways for 4 days, which is a tight trading range. It is also in the middle of a 5 month trading range. There is no energy. Traders do not sense that the price is horribly wrong. In fact, they think it is just about right. They therefore buy as it goes down and sell as it goes up.
They are confident that it will not go up too far or down too far, and therefore they take quick profits. This results in a continuation of the 5 month range.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart has been in a 25 pip range for the past 6 hours. It broke above yesterday’s high, but pulled back.
Today might be forming a small double top with Friday’s high. Traders will watch for a reversal down. If one begins, the 1st target is a 50% retracement of the 3 week rally. Since that rally has been small and weak, that is only about 50 pips below. The next target for the bears is the April 1.1184 low.
The daily ranges have been small for several weeks. Furthermore, there has been little movement during the US session. Day traders are therefore scalping. There is no sign that this is about to change.
For the past 2 weeks, I have been writing that the selloff down to the April 2 low was a spike and channel sell climax. In addition, I said that there would typically be a rally to the March 26 top of the channel and then an evolution into a trading range. That is what is happening.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
The Emini sold off from above yesterday’s high to below its low. Today is therefore an outside down day. Since there is an 8 day wedge rally, today is a sell signal bar for tomorrow. If there is a reversal down, it will probably be about 50 points and test last week’s low and maybe the March 21 high.
Whenever there is an outside down day, there is an increased chance of an inside day for the next day. The bulls will try to create a bull inside day tomorrow, which would be a buy signal bar for Monday. The Emini is closed on Good 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 Intraday Market Update page.