Emini and Forex Trading Update:
Tuesday January 14, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini rallied from the open yesterday in a Small Pullback Bull Trend. After breaking to a new all-time high, there was some profit-taking and the rallied stalled. There was trend resumption up at the end of the day. This increases the chance of a gap up today.
Everyone knows that the daily chart is overbought. However, traders are still buying every 1 – 3 day pullback. They will continue to do that until there is a clear top or a strong reversal down.
Overnight Emini Globex trading
The Emini is down 2 points in the Globex session. Since yesterday was a strong bull trend, the rally is unsustainable. It should attract some profit taking by the end of the 2nd hour. That typically results in at least a couple hours of sideways to down trading.
Yesterday’s 3 hour tight trading range is obvious support. That sideways trading means that traders thought it was a fair price. They might conclude that it still is a fair price. If so, today could get pulled back down there and go sideways again for an hour or more.
A tight trading range late in a bull trend is often the Final Bull Flag. It is a magnet and usually draws the market back to it. That is a reasonable downside target if there is a reversal today.
When there is a strong bull trend day, like yesterday, there is a 25% chance that it will continue all day today. Therefore, if today rallies on the open and there is no credible top, day traders will continue to buy.
More likely, any early rally will fail within a couple hours. Day traders will expect more trading range price action today and sideways to down trading for at least 2 hours at some point.
EURUSD Forex market trading strategies
The daily chart of the EURUSD Forex market has been in a bear channel for 2 weeks. It has also been in a trading range for 6 months with most legs up and down lasting 2 – 3 weeks. There is currently no reason to expect this to change.
Most reversals come at support or resistance. The December 6 and December 20 lows are obvious support. Traders expect this selloff to continue down to that area over the next week. They will then watch for a sign of a reversal up or a continuation down to the next support at the November 29 low.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market sold off 40 pips over the past 6 hours It is now below yesterday’s low. The bears see yesterday as a Low 1 sell signal bar on the daily chart in a 2 week bear channel.
But it has a bull body and it was the 2nd consecutive bull bar. This is a weak sell signal. Consequently, there might be more buyers than sellers below its low.
The overnight selloff has been in a tight bear channel. That means the bulls have not yet been buying. However, because yesterday was a weak sell signal, the odds are against today continuing much lower. Therefore, the bears will probably soon switch to selling 20 pip rallies from selling at the market.
Once the bulls start to see 20 pip bounces, they will begin to buy tests of the day’s low. That should result in a trading range forming today around yesterday’s low.
Can today reverse up strongly from below yesterday’s low? Unlikely. The bars on the 5 minute chart are small and there are magnets below on the daily chart.
What about a continued bear trend day? While it is possible, the weak sell signal on the daily chart will make traders want to sell rallies. That reduces the chances of a big bear trend day. The bear trend will probably evolve into a 20 – 30 pip tall trading range for the rest of the day, and close around yesterday’s low.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
After a trading range open, the bulls got a rally from a double bottom higher low. The rally continued up in a Small Pullback Bull Trend for a measured move. The Emini then collapsed on some China tariff news. After a new low, there was a strong reversal back up, and the Emini finished just above the open.
The one bar selloff from the high was a Bear Major Surprise Bar. It therefore could lead to additional sideways to down trading tomorrow. However, the bull trend on the daily chart has been very strong. Therefore, the odds still favor higher prices, even if there is a 1 – 3 day pullback.
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.