Emini and Forex Trading Update:
Monday May 11, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini is deciding what to do with the April high. There is a High 1 bull flag on the Monthly chart. The buy signal triggers if May goes above the April high.
Last week closed strongly and that increased the chance of the Emini going above the April high this week. But the bears want a double top. They know the odds favor a move down to 2600 beginning in May.
After 2 big bear bars on the monthly chart, the monthly buy signal is minor. There will probably be sellers below the all-time high. Traders expect at least a small 2nd leg sideways to down to begin within a month or two.
Last week triggered a sell signal on the weekly chart. But the week closed on its high. It is a High 1 buy signal bar for this week.
There is a nested wedge top on the daily chart. The top is the April high. Last week’s rally might be forming a lower high double top for a 2nd leg down. But the momentum up is strong and there are buy signals on the weekly and monthly chart. If this week does not reverse down, the Emini probably go above the April high.
Overnight Emini Globex trading
The Emini is down 34 points in the Globex session. It might gap below Friday’s low. Since Friday was a big bull day, if today is a big bear day with very little overlap of Friday’s range, Friday would become a bull trap. Traders would then conclude that the move down to 2600 might have begun.
Today’s price action is important because it will affect the daily, weekly, and monthly charts. If today closes near its low, it would be a strong entry bar for a reversal down on the daily chart. The location (extreme buy climax after huge bear trend) and nested wedge both are good for the bears.
If today is going to be the start of a 2nd leg down from the nested wedge, the bears should be able to create a bear trend day, or at least get the day to close near its low. But if they cannot get today to close near its low, traders will suspect that the Emini will have to go more sideways to up before reversing down.
If today is a big bull trend day, traders would look for a break above last week’s high and then the April high this week.
The Globex session sold off in a tight bear channel. There were several breakouts along the way. Each was a sell climax. The first reversal up from a tight bear channel is typically minor. Traders should expect the overnight bear channel to evolve into a trading range early today. What follows will effect the rest of the week. If today is a big bear day, it could be the start of a 2 – 3 week selloff.
EURUSD Forex market trading strategies
The EURUSD Forex market on the daily chart traded below Friday’s low and therefore triggered a Low 1 sell signal today. But Friday was a doji, which is a weak sell signal bar. The signal is coming at the bottom of a trading range. That is bad context for a short because legs in trading ranges usually reverse instead of becoming trends.
And finally, today is not a big bear bar closing near its low. It is a weak entry bar, but there are many hour left before today ends. There is a small chance that it could be very bearish by the close of the day.
The EURUSD is still on Thursday’s buy signal. That was a strong buy signal bar and it formed a High 2 bull flag from the March 27 rally. It is also a buy signal bar for a higher low major trend reversal and a head and shoulders bottom.
Should get reversal or bear breakout this week
This week is important. Traders will decide if the EURUSD is beginning a move up to the May 1 double top and then possibly the March high. Because of the strong buy signal bar last week and the strong legs up in March, the odds are slightly better for the bulls.
However, the monthly chart is still in a 2 year bear channel. Traders know that there is almost a 50% chance that the EURUSD will break below the March low and continue down to par.
For 2 years, traders have correctly bet on reversals. Whether or not the bear trend ultimately continues down to par, reversals every few weeks are still more likely than the start of a trend.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market triggered a weak sell signal overnight by falling below Friday’s low. However, the breakout was weak and the EURUSD was been sideways in a 15 pip range over the 5 hours since the breakout.
Traders are deciding whether the breakout will fail or succeed. If today closes near its high, even if it is not a big bull day, today will form a buy signal bar on the daily chart. There is a micro double bottom and double bottom at the bottom of a trading range. The bulls would then need a strong rally tomorrow to convince traders that this week will trade up.
The bears want more than just a close below Friday’s low. They would like today to be a big bear bar closing on its low and below last week’s low. Traders would then conclude that the EURUSD was probably going to break below the April 24 buy signal bar.
Markets tend to continue doing what they have been doing
Market’s have inertia. Since today has been in a tight trading range with small bars, the day will probably remain a scalper’s market. At a minimum, the bulls want today to close above yesterday’s low and today’s open. Both will be magnets today. The bears want today to close on its low and below Friday’s low. That would increase the chance of lower prices for the rest of the week.
After being sideways for a month in a tight trading range within a 9 month trading range, traders expect a 2 – 3 week move up or down to begin within a week or two. But until there is a breakout, there is no breakout. Day traders will continue to scalp while they wait for the breakout.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
The Emini reversed up from below Friday’s low to above its high. Today was an outside up day, which is a sign of strong bulls. That increases the chance that the Emini will trade above the April high this week. The 100, 150, and 200 day simple moving averages are also magnets above.
While the rally is climactic, there is no strong reversal down yet. Therefore traders continue to expect at least slightly higher prices.
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.