Emini and Forex Trading Update:
Thursday June 11, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini has been in a Small Pullback Bull Trend since the March low. Every pullback ended within 3 days. Yesterday was the 2nd day of a pullback from testing the close of 2019. It is a buy signal bar for today. But it has a bear body and it is has failed 3 times at the resistance of the 2019 close.
Traders expect that there is a lot of supply around the February high. This should lead to a 10 – 15% pullback from around that high.
Is this the start of a 10 – 15% pullback?
It is too early to say. The bears will need a couple big bear days for traders to conclude that a correction might be underway.
The rally over the past couple weeks has been exceptionally strong. If the bulls get a reversal back up within a few days, the rally will probably continue to above the February 24 high. That high is the bottom of a gap on both the daily and weekly charts.
At the moment, the Emini is more likely to pull back for several weeks before making a new high. Therefore, traders expect the upside to be limited from here this month.
Possible island top
When there was that big gap up on Friday, I said it was a possible exhaustion gap on the daily chart. I also said that there could be a gap down this week, which could create an island top.
Most island tops and bottoms are minor reversal patterns. But this rally is an extreme buy climax after a crash in March. It is now testing the old high. Many buyers from February are relieved to be able to exit with much of a loss.
That increases the chance of a swing down from here for a few weeks. Today’s big gap down could be the start of that swing down. It will be more likely if today is a big bear day on the daily chart.
Overnight Emini Globex trading
Today is rollover day in the Emini. Most day traders will still trade the June contract until tomorrow. They will then switch to September.
The Emini is down 80 points in the Globex session. There will be a big gap down on the open. That will create an island top with last week’s gap up.
When there is a big gap down, there is only a 20% chance of a strong bull or bear trend from the open. Traders expect some early trading range trading for the 1st hour or two.
The bulls will look for a double bottom or wedge bottom to buy for a swing up. However, the bears want to sell around the EMA. They will look for a wedge rally to the EMA or a double top around the EMA. They will short for a swing down.
If there is a trading range open, it would be a sign of balance. That usually reduces the chance of the day trending strongly all day. If there is a strong trend, it typically will not last until the close.
EURUSD Forex market trading strategies
The EURUSD Forex market on the daily chart had a pair of big bull bars last week for the 3rd leg up in a parabolic wedge buy climax. There is often a brief 2nd leg up before the bulls take profits.
Yesterday is a good candidate for that 2nd leg up and the end of the rally for the next week or two. Today so far is a bear day. If it closes near its low, it would be a reasonable sell signal bar.
If this is the start of a pullback, the 1st target is the bottom of the 2 day buy climax. That is the June 3 low, which is just below 1.1200. It usually is around the EMA. If the bears break below that, the next targets are breakout points below. These are the March 27 and May 1 highs.
The bulls want any reversal down to end after a day or two. They then want the rally to quickly continue up to above the March high.
However, this particular pattern has a 70% chance of testing the June 3 buy climax low before going much higher. Even if the bull trend continued up after just a one day pullback, traders will look for a small wedge top with the June 5 and June 10 highs begin the 1st 2 legs up. Traders expect a pullback starting now or after one more brief leg up.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market has been in a broad trading range. It is currently near the low of the day. Many bulls on the daily chart are starting to sell rallies to take profits. The bears know see that and they are selling rallies as well.
If today closes near its low, it will be a sell signal bar on the daily chart. An increasing number of bulls will begin to sell at the market and on downside breakouts instead of on rallies.
If that happens, the EURUSD will start to have bear trend days. That means there will be several bear trends on the 5 minute chart.
So far, the bulls are buying selloffs and the bears are buying back their shorts around the prior low. That is creating the overnight trading range. But there is an increased chance of swings down on the 5 minute chart over the next few days.
Remember, there is a 30% chance that the 3 week rally continues up to above the March high without a pullback to the June 3 low. Consequently, traders will swing trade longs if there is a strong rally today or tomorrow.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
The Emini gapped down and formed a 4 day island top. This was a crash day. There were waves of relentless selling.
On the daily chart, today was a huge bear candlestick. This is a Bear Major Surprise Bar on the daily chart. Traders should expect lower prices. I have been saying that the correction would be about 15%. That is still likely. With today’s selloff, the Emini is almost halfway there.
On the weekly chart, this week is now an outside down candlestick. Tomorrow is Friday so weekly support and resistance will be important. This is especially true in the final hour. The bulls want the week to close above the 3000 Big Round Number and last week’s low. They hope that today is just a bear trap and that the Emini will still make a new high this month.
The bears want this to be the start of a 15% selloff. It is a good candidate. They want tomorrow to be a bear day. Also, they want the week to close on the low. That would increase the chance of lower prices next week.
Since today was a sell climax, there will probably be at least a couple hours of sideways to up trading tomorrow.
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.