Trading Update: Monday July 11, 2022
Emini pre-open market analysis
Emini daily chart
- The Emini has six consecutive bull bars on the daily chart. While this is good for the bulls and a sign of strength, six consecutive bars are not common. This increases the odds that bears want close below open today or tomorrow, ending the bull streak.
- The bulls want the test of the June 24 close to lead to more buyers and an upside breakout of the bear flag (June 17 low to June 24 high).
- The bulls have a credible higher low major trend reversal from the June 30 high. They hope it will lead to a test of the June major lower high. It is important to remember that most major trend reversals lead to minor legs in trading ranges and not strong trends in the opposite direction.
- While the bulls have done an excellent job getting six consecutive bull bars, they have not gotten a strong breakout yet. Without the strong breakout, especially above the June 28 high, the odds are the market will continue in a trading range.
- The bears know that the bulls have not done enough to make the market clearly always in long.
- The bears know that it would not take much to cause the market to become always in long.
- Since the bears still see the market as a trading range or bear trend, they will try their best to disappoint the bulls and remind traders that the market is still in a trading range.
- Since the bulls have six consecutive bull bars, the bears will likely need a micro double top before they can reverse the market back down to the June 30 low.
- Overall, traders should expect continued trading range price action on the daily chart. As Al often says, “until there is a breakout, there is no breakout.” Traders will pay attention to the open today and expect today or tomorrow to have a bear close, ending the bull streak of consecutive bull bars.
Emini 5-minute chart and what to expect today
- Emini is down 32 points in the overnight Globex session.
- The Globex market has been in a trading range for the past several hours and will likely continue into the U.S. Session open at 6:30.
- The odds are today or tomorrow will have a close below the open due to the six consecutive bull bars on the daily chart.
- This means traders will pay close attention to any rally above the open and look for a sell setup betting on the reversal below the open.
- This will cause the bulls to hesitate to buy aggressively above the open since they know lower odds of getting a 7th consecutive bull close.
- The odds favor a trading range open. The market may have a strong trend from the open. If one side does begin to get consecutive strong trend bars with good context, traders will start trend trading, regardless of the six successive bull bars on the daily chart.
- Since the odds favor a trading range open, traders will expect limit order trading on the open and for most reversals to fail.
- In general, if a trader has trouble trading the open, they should consider waiting for 6-12 bars or waiting for a credible stop entry setup such as a double top/bottom, wedge top/bottom, or a strong breakout with follow-through.
- It is essential to remember that trading ranges always try to get traders to make rash decisions. A typical example is a strong breakout to the extreme of the trading range. It is easy to get worried that one will miss the breakout. This causes one to enter quickly before the breakout of the range, only to get trapped when the breakout fails.
- Overall, traders should pay close attention to the open of the day, especially if today has a lot of trading range price action and the odds favor a close below the open.
Friday’s Emini setups
Al created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The EURUSD broke below the May to June trading range and the 2017 low last week.
- The bear breakout is probably strong enough to lead to a second leg down.
- At the moment, the EURUSD is in an 11-bar bear micro channel which is climactic behavior and increases the odds of a pullback soon.
- As big as the bear breakout is, the odds are the market will get back to the 2017 low. Some bulls bought the 2017 low and were willing to scale in lower.
- Right now, the market is deciding if it will have to test 1.0000 before it tests the 2017 low. At the moment, I think the odds slightly favor a bounce and test of the 2017 low before the market test of 1.0000, which is near a 20% correction.
- Also, 1.0000 is a big round number, so there will likely be buyers above seeing 1.0000 as a great value opportunity to buy. These are the same value investors that were happy to buy the Emini at a 20% correction.
- If 1.0000 is a great value buy, why would bulls be willing to buy before the considerable round number? That is because bulls might be worried about not getting filled, so they will be happy to buy 50 – 100 pips above the 1.0000 big round number.
- The bears still have a possible double top measured move projection from the May 30 high to the May 13 low that projects down to the .9913 price level. While I do not think the market will get there (for above reasons), it is possible that the market vacuums down to it before there is a reversal.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
- Al will post chart after the close.
Al created the SP500 Emini charts.
End of day summary
- Today was a sell climax that led to a triangle (blue lines) on the open lasting several hours.
- The triangle had an upside breakout that failed just under the high of bar one, leading to a selloff and new low of the day.
- At the start of the session, the odds favored a close below the open of the day due to the six consecutive bull bars on the daily (read daily section of blog post).
- The bears had a strong breakout on bar 2 that sold the close. However, follow-through (bars 4-5) was weak and led to sideways trading.
- Bar 1 was a big bull bar which made it a bad buy (big bar, so big risk selling below bar 1). Also, the signal bar was a bull bar which increased the odds of the market testing the one low.
- The rally up 7:45 PT was strong; however, the bulls realistically needed one more bar (ideally closing above the moving average (blue line).
- At around 9:30, the market had been going sideways in a triangle, close to 50-50%.
- The market became clearly always in long 10:10, and the odds favored at least a second leg up and a possible test of the bar 1 high.
- The market formed a wedge top at 11:00, leading to a sell-the-close market and test of the day’s low.
- Today was a disappointing day for the bulls and an end to the 6-bar bull streak on the daily chart.
- The bulls want a second leg up following the July 1st higher low. The bears want a double top with the June 28 high.
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. Al talks about the detailed S&P Emini futures price action real-time throughout the day in the BrooksPriceAction.com on trading room days. We offer a 2 day free trial.
Charts use Pacific Time
When times are mentioned, it is USA Pacific Time. The Emini day session charts begin at 6:30 am PT and end at 1:15 pm PT which is 15 minutes after the NYSE closes. You can read background information on the market reports on the Market Update page.