Trading Update: Wednesday July 6, 2022
Emini pre-open market analysis
Emini daily chart
- Yesterday was an outside up bar closing near its high. This is the third consecutive bull bar at what might be a higher low major trend reversal.
- Emini bulls want bull breakout following today’s FOMC release.
- The bulls want an upside breakout and test of the June 28 high and test of 4,000 big round number.
- Next, the bulls want a test of the June major lower high. If the bull can get above it, that would make the market either a bull trend or a trading range and no longer a bear trend.
- The bulls need a consecutive big bull bar closing on or near their highs before most traders agree the market is always in long. Otherwise, traders will assume the market is still within the two-week trading range.
- The market is deciding on testing the June high or the June 17 low. Right now, the odds slightly favor the bulls, but not by much.
- Since today is a FOMC minutes release that will be published at 11:00 PT. When there is an FOMC release, there is always an increased risk of a big breakout up or down.
- Overall, on the daily chart, most traders should wait for a breakout up or down and decide if the breakout is more likely to succeed or reverse.
Emini 5-minute chart and what to expect today
- Emini is down 3 points in the overnight Globex session.
- At the moment, the market is likely to open with a small gap down that will likely close.
- Traders should assume today will have a trading range open (limit order market).
- Since today the FOMC meeting minutes will be released at 11:00 PT, traders should treat the day as two separate days.
- Traders should go flat an hour before the report and not trade until the close of the second bar following the FOMC release.
- It is essential to remember that the FOMC often reverses after the first 5-minute close (11:05), so it is usually better to wait and see the follow-through (11:10 ) before placing a trade which is why traders are better off waiting for the second bar to close.
- Overall, traders should treat the open like any other day. Most traders should wait for 6-12 bars (expecting multiple reversals on open) and wait for a stop entry such as a double bottom/top, wedge bottom/top, or a strong breakout with follow-through.
- Again, the FOMC release always has the potential to create a big move up or down, so the day close look very different after the FOMC release.
Yesterday’s Emini setups
Al created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- Yesterday closed as big bear bar closing near its low and below the 2017 low.
- So far, today is a strong follow-through bar for the bears. Today’s bar has a small tail on top, which means traders sold it as soon as the bar opened.
- Right now, the bear’s breakout below the 2017 low is a surprise, and assuming today does not reverse and become a big bull bar closing on its high, the odds are the bears will have a second leg down.
- The bulls hope this is exhaustion late in a year-long bear trend.
- The next big target for the bears is the 1.0000 big round number. The market may collapse to the 1.0000 round number, but that is not likely (maybe a 30% chance) without a pullback.
- The bears also have measured move targets below. One target is the Jun 27 high to the June 15 low, which projects around 1.0100.
- The other bear measured move projection is from the May 30 high to the May 13 low, which projects under the 1.0000 round number.
- Traders will pay close attention to today’s close or today be a strong bear bar closing on its low, or will the bears be disappointed with the follow-through. Today may be a big bull reversal bar. However, it would be an 8-bar bear micro channel which would likely make the first reversal up minor.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Al created the SP500 Emini charts.
End of day summary
- Today was a trading range that led to a late bull breakout, which failed at the end of the day.
- Traders usually treat an FOMC day as two different days, with the report being the end of the first half and the start of the second portion of the day.
- The first 6 bars were sideways and a sign that the market might go sideways up until the report at 11:00PT.
- The bears were able to get a lower high double top around 7:15, which led to a couple of legs sideways to down, forming a wedge bottom at 8:45.
- The problem with the 7:15 bear breakout bar was that the bar was big, which increased the risk, and the reward was bad since it was at the bottom of a tight trading range.
- Also, the selloff down to 8:45 had several reversal bars closing near their highs, which made the selloff more likely a bear leg in a trading range. This means the odds favored a bull leg in a trading range and a test of to the 7:35 high, which was tested during the FOMC release.
- The FOMC release had several overlapping bars. This is an excellent example of why it is important not to be too eager and wait for the bars to close, especially during an FOMC release.
- Also, it is usually better to wait for at least 2 bars following the FOMC release (11:00) before placing a trade.
- The bulls had an outside up bar at 13:30 that was a big enough surprise to make the market always in long and increase the odds of a second leg up. The bulls got a couple of legs up, forming a wedge top around 12:45 that led to an end-of-day selloff.
- Today was a bull bar on the daily chart. However, it was a disappointing bar for the bulls. This increases the odds of continued trading range price action on the daily chart.
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.
Good call Brad, SPY reversed right on cue after the second 5 minute bar after the FED released minutes. Thanks for the heads up.