Emini and Forex Trading Update:
Wednesday October 30, 2019
I will update again at the end of the day.
Pre-Open market analysis
The Emini yesterday formed an outside up day and then an outside down day. It had several sharp moves up and down and formed a trading range day. But by closing below its midpoint, yesterday is now a sell signal bar for today.
The bears want a reversal down from a micro double top and a failed breakout above the July all-time high. However, unless reversal down is big and has follow-through selling, the bulls will buy it. They will bet it is simply a pullback in the 2019 bull trend.
Traders are waiting for the reaction to today’s 11 am PST FOMC announcement. They expect the Fed to cut the interest rate. But they don’t know what wording the Fed will use in its statement.
There is usually both a sharp move up and down immediately after the news. Day traders should get flat ahead of the announcement and not trade again for at least 10 minutes afterwards. Furthermore, they should be open to anything. There can be a big trend up or down or a reversal.
Overnight Emini Globex trading
The Emini is up 1 point in the Globex session. It will probably open within the tight 2 day trading range.
While a strong trend up or down is possible before today’s 11 am PST Fed interest rate announcement, it is more likely that the trading range price action will continue until the report. Therefore, day traders will look for reversals after 1 – 2 hour moves up or down.
If the morning range is very tight, experienced day traders will scalp with limit orders. They will use relatively wide stops and scale in.
This is a losing strategy for most traders. If the Emini is very quiet ahead of the report, most traders should patiently wait for a clear signal or a strong breakout before trading.
EURUSD Forex market trading strategies
The EURUSD daily Forex chart has had a small 3 day rally after a 5 day pullback from the October parabolic wedge buy climax. This bounce is weak.
Furthermore, the pullback has probably not fallen far enough to convince traders that the selling is over. Consequently, most bulls will not yet buy. They would like to see a reversal up from stronger support before believing that the October rally is resuming.
For example, a pullback from a buy climax to resistance often retraces about 50% of the rally. Also, when the rally ends with a buy climax, the pullback often goes down to the bottom of that buy climax. That is the October 15 low.
Today’s FOMC announcement is a potential catalyst for a big move up or down. If there is a big enough rally, traders will conclude that the pullback has ended. More likely, this 3 day bounce will form a lower high and there will be a test down below 1.10 within a couple weeks.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart has had a small overnight range. It is currently reversing down from above yesterday’s high. While the 2 hour selloff could be the start of a 2nd leg down on the daily chart, it so far is small. It looks more like a bear leg in the 3 day trading range.
Also, many traders will be hesitant to swing trade ahead of today’s FOMC announcement. This is because the Fed’s action often leads to a big move and it can be up or down. Traders will be unwilling to sell at the bottom of a selloff or buy at the top of a rally, betting on a trend, before the report is released.
While a 2nd leg down is likely on the daily chart before there is a test of the October high, most traders want to hear what the Fed will say before they will be willing to hold onto a position for hours to days. Therefore, most day traders will scalp ahead of the report.
Finally, there is usually both a sharp move up and down in the minutes after the report. Day traders should exit positions ahead of the 11 am PST report. They should then wait at least 10 minutes before resuming trading after the 11 am PST FOMC announcement.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
The Emini sold off on the open and closed the gap above Friday’s high. That also closed the gap on the weekly chart. However, it rallied after the FOMC announcement and made a new all-time high.
Yesterday was an outside day and today was a bigger outside day. Consecutive outside days is a buy setup on the daily chart. Today is the buy signal bar. If tomorrow triggers the buy by going above today’s high, traders will expect at least a few more days of sideways to up trading. But when an oo buy setup occurs late in a bull trend like this, the upside is usually just a few bars before there is a 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.