Emini and Forex Trading Update:
Thursday September 17, 2020
I will update again at the end of the day.
Pre-Open market analysis
Yesterday broke above last week’s high, which triggered a weekly buy signal. But the setup was weak because last week was a bear bar after an outside down bar. Furthermore, the Emini reversed down from the top of a 3 year expanding triangle top 2 weeks ago. Finally, there were streaks of 7 and 9 consecutive bull bars in August and traders expect a pullback to below the low of both.
Yesterday was an outside down day. There is now a small double top with last Thursdays high. The bears are hoping that this will lead to a break below the September low and then a move down to 3000 – 3200.
I have mentioned a few times that September might trade below the August low after reversing down from above the August high. It would then be an outside down month on the monthly chart. That would increase the chance of lower prices in October.
Because the Emini is still in the 2 week trading range, it still might work its way up to 3450 – 3500. Whether or not it does, traders expect the reversal down from 2 weeks ago to continue down to 3000 – 3200 before there is a new high.
Overnight Emini Globex trading
The Emini is down 58 points in the Globex session. Today will open with a big gap down.
When there is a big gap down, the Emini is far below the 20 bar EMA. Day traders will only sell far below the average price if the early bars are far above average in terms of their bearishness. They want to see 2 or more consecutive bear bars closing on their lows.
The bulls want the opposite. They want to see a couple consecutive big bull bars closing near their highs. If they get that, they then hope that today will trend up.
Most of the time, a big gap down leads to confusion. Has the gap already fully priced in the bearish news? This typically results in a trading range for the 1st hour or two. The bulls will look to buy a double bottom or wedge bottom for a swing up. The bears want to sell closer to the average price. They look for a wedge bear flag or a double top near the 20 bar EMA.
If there is a trading range open, it is a sign of balance between the bulls and bears. It reduces the chance that a breakout from the range will lead to a trend that lasts for the rest of the day. More often, there is some more trading range price action later in the day.
Yesterday’s setups
Here are several reasonable stop entry setups from yesterday. I show each buy entry with a green rectangle and each sell entry with a red rectangle. I rarely also show limit order entries and entries on the close of bars. I do not want the lines to be distracting. If they are longer, I make them dotted. But, they have to be visible, so I make the shorter ones solid. Buyers of both the Brooks Trading Course and Encyclopedia of Chart Patterns have access to a much more detailed explanation of the swing trades for each day (see Online Course/BTC Daily Setups).
My goal with these charts is to present an Always In perspective. If a trader was trying to be Always In or nearly Always In a position all day, and he was not currently in the market, these entries would be logical times for him to enter.
If the risk is too big for your account, you should wait for trades with less risk or trade an alternative market like the Micro Emini.
EURUSD Forex market trading strategies
The EURUSD Forex market on the daily chart broke below the bottom of its 7-week tight trading range overnight but is reversing up. There is a head and shoulders top over the past 5 weeks. So far, today is a failed breakout below the neck line. Traders expected that since most trading range breakouts fail.
However, if today reverses back down and closes far below the range, traders will believe that a reversal down to the June 10 high is underway. It is more likely that attempts to break out of a trading range reverse and the trading range continues.
The bulls see today as a 2nd leg down from the September 1 high. For them, it is a pullback in a bull trend. If today closes near its high, today will be a buy signal bar for a High 2 bull flag.
But while the bulls want a break above the range, they know that it is more likely that the best they will get is a bounce for a few days. They can see that the EURUSD has had many legs up and down for 7 weeks and each has reversed after about a week. There is no reason to assume that a rally from here will be different.
Today will probably be a weak buy signal bar
The 5 minute chart of the EURUSD Forex market sold off to just below the bottom of the 7 week trading range and then reversed up. The bulls want today to close near its high. In addition, they want it to close far above the open and have a big bull body. Today would then be a more reliable buy signal bar for tomorrow.
The bears want today to close below the bottom of the range, back at the low of the day. They then want tomorrow to be a 2nd consecutive close below the range. If they get that, traders will conclude that a reversal down is underway.
What is most likely? In a trading range, traders expect weak buy and sell signals and bad follow-through after breakout attempts. Therefore, today will probably close above the low of the trading range and disappoint the bears. In addition, it will probably close in the upper half of the day’s range, which would make it a reversal day on the daily chart. But it will probably not have a big bull body, which will disappoint the bulls.
Overnight EURUSD Forex trading
The EURUSD has been in a 35 pip range for the past 5 hours. Traders are deciding if the reversal up from the overnight low will continue to far above the open.
It is more likely that today will not get more than 30 pips from the open for the remainder of the day. Day traders have switched to scalping 5 hours ago and will continue to scalp unless the bars get bigger and there is a series of strong trend bars up or down.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Here are several reasonable stop entry setups for today. I show each buy entry with a green rectangle and each sell entry with a red rectangle. I rarely also show limit order entries and entries on the close of bars. I do not want the lines to be distracting. If they are longer, I make them dotted. But, they have to be visible, so I make the shorter ones solid. Buyers of both the Brooks Trading Course and Encyclopedia of Chart Patterns have access to a much more detailed explanation of the swing trades for each day (see Online Course/BTC Daily Setups).
My goal with these charts is to present an Always In perspective. If a trader was trying to be Always In or nearly Always In a position all day, and he was not currently in the market, these entries would be logical times for him to enter.
If the risk is too big for your account, you should wait for trades with less risk or trade an alternative market like the Micro Emini.
End of day summary
Today opened with a big gap down and at the 50 day MA. It rallied to just above the February high and the open of the week, but reversed down from a wedge top. It did not close the gap on the daily chart.
The Emini formed a triangle for the 1st 6 hours. In the final hour, it rallied up again from the 50 day MA and broke above the bear trend line at the top of the triangle. The Emini then closed near the high of the day. Today is now a buy signal bar for tomorrow on the daily chart.
The Emini tested the 50 day MA many times today after turning down from a small double top bear flag on the daily chart yesterday. Traders are deciding if the 50 day MA will be support and lead to a break above the 2 week trading range.
The bears see these 2 weeks as a bear flag. Whether or not the bulls get a rally to 3500, traders should expect a selloff to 3000 – 3200 before there is a new high. Traders will continue to sell rallies.
See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.
Trading Room
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.
Emini 9/17: Why isn’t the 10.50 bear bar a sell as a wedge top?
It is but not a reliable one. There was an 8 bar bull micro channel, a prominent tail below the bar, and a strong rally on 41 42, which was likely to have restarted the count.