Emini and Forex Trading Update:
Wednesday February 12, 2020
I will update again at the end of the day.
Pre-Open market analysis
Yesterday gapped up to the top of the 3 week wedge channel. It sold off to below Monday’s high and closed the gap.
Since yesterday had a bear body on the daily chart, it is a sell signal bar for today. There is a wedge top and a higher high major trend reversal. However, if the bears get a reversal down, it will probably lead to a continuation of the 6 week trading range that began around Christmas and not a bear trend.
A trading range disappoints bulls and bears. Consequently, tomorrow will probably not be a strong bear day. Most days will have a lot of trading range price action.
If the Emini in fact has been in a trading range since Christmas, the target for the bears would be the bottom of the range. That would be about a 5% pullback.
Overnight Emini Globex trading
The Emini is up 10 points in the Globex session. It will probably break above yesterday’s bear channel on the open. Yesterday was likely a bull flag from Monday’s rally.
There is no nearby resistance and the bull trend on the daily and weekly charts are strong. That slightly increases the chance of a bull trend day.
The bears will want a double top with yesterday’s high. But today is breaking above a bull flag (yesterday’s bear channel). That makes a bear trend less likely.
Since yesterday was a protracted selloff, there is an increased chance of trading range trading today. But there is a bullish bias from the break above the bull flag.
Can the 2 week rally continue much higher? If the bulls get 2 or 3 more bull bars, then the Emini is probably resuming its bull trend. Without that, the Emini is more likely at or near the top of a 6 week trading range. That means traders will look for a bear leg to begin within the next several weeks.
EURUSD Forex market trading strategies
The daily chart of the EURUSD Forex market had a bull reversal day just above the October 1 low. That low is the bottom of the 6 month trading range and the 2 year bear trend. It is major support. A small bull bar is not a strong enough foundation to build a rally that will reverse 6 big bear days.
Yesterday was a sign of minor profit-taking and not the end of the 6 week bear trend. The bulls typically need at least a small double bottom before they can get more than a 3 day rally.
Also, there are several magnets below around the 1.08 Big Round Number. There are 2 measured move targets there and a gap from April 2017. The EURUSD is close enough to those magnets so that it will probably not be able to escape their magnetic pull.
However, traders have bought every new low for 2 years. This has resulted in at least a 2 week, 200 pip rally every time. Consequently, the bulls might get one or two more 200 pip rallies before the bears reach 1.08.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market has been in a small range overnight. It did not trigger the buy signal on the daily chart. It turned down from 1 pip below yesterday’s high.
Because the daily chart is so oversold, there is an increased chance of a strong short covering rally at any time. Also, the October low is a magnet that is only 12 pips below yesterday’s low. That increases the chance of s surprisingly strong breakout below that support.
But what is most likely? Yesterday was a small sideways day. Today is also a small sideways day. The bears are probably exhausted and the bulls do not believe that yesterday is a reliable bottom. Therefore, today will probably remain as another small trading range day. The potential for a big move up or down is there, but the probability is small.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
The Emini gapped above yesterday’s bear channel and then broke above yesterday’s high. There was no follow-through buying and it entered a trading range. There was a small rally into the close.
Traders are deciding if the 3 week rally is going to reverse down from a wedge top or continue up in a bull trend. The size of the selloff 3 weeks ago makes traders wonder if the Emini has been in a trading range since Christmas. If so, it will probably test down to the January low by the end of March.
But if the bulls get 2 or 3 bull bars with a couple closes above 3400, the odds will favor a measured move up from that January trading range. There is a Leg 1 = Leg 2 measured move target on the weekly chart just below 3500.
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.