Trading Update: Tuesday July 12, 2022
Emini pre-open market analysis
Emini daily chart
- The bears ended the six consecutive bull bar streak yesterday by getting a bear bar.
- While the odds favor the bulls getting a second leg up after six bull bars, the rally up to July 8th is not as strong as the May 27th rally.
- The bulls want a successful higher low major trend reversal (July 1 was the signal bar), a bull breakout above the June 28 high, and a test of the June major lower high.
- The bears want to continue sideways to down.
- Overall, the market will likely continue sideways in the two-week tight trading range as the bulls and bear fight over the breakout.
- The market is close to neutral. If the odds favored one side, the market would not be going sideways in a two-week tight trading range.
- Most traders will wait for more clarity in the form of a breakout. After a breakout up or down, traders will assess the strength of the breakout and decide if it is likely to succeed or fail.
Emini 5-minute chart and what to expect today
- Emini is down 16 points in the overnight Globex session.
- The market has been in a trading range for most of the Globex session.
- The odds favor a trading range open which means traders should expect a limit order market.
- Most traders are better off waiting for 6-12 bars before placing a trade. This is because a limit order market means multiple reversals, which means a better successful breakout is not ideal.
- Also, on the open, there is a 50% chance that the initial move will reverse.
- Traders can wait for a credible stop entry such as a double bottom/top, wedge bottom/top, or even a strong breakout with follow-through as long as they can trade an appropriate position side (trade small).
- Overall, if the open is a trading range, traders should consider being patient and waiting for a credible entry and not be in a rush to get in. It is easy to take several quick losses in a trading range on the open and spend the rest of the day trying to get back to break even.
- Lastly, as Al often says in the trading room, “until there is a breakout, there is no breakout.” I say this because if there is going to be a strong breakout, there will be plenty of time to buy after the strong breakout has occurred, and since most breakouts of trading ranges fail, it is best to be cautious of breakouts.
Yesterday’s Emini setups
Al created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The EURUSD reached 1.0000 a couple of hours ago early this morning. The market tested it to the pip and rallied over 70 pips.
- The market has not reached this level for almost 20 years. December 2002 was the last time the EURUSD was at the 1.0000 big round number.
- The chart below shows an example of how a trader might look to buy the big round number support level on a smaller time frame chart. This was just an example; most traders should only trade the chart in front of them.
- The bears have a 12-bar bear micro channel on the daily chart, which is extreme and at major support (1.0000 big round number). The odds favor a bounce as the bears take profits and bulls buy for a scalp.
- Also, yesterday was a big bear body with no tails above or below the bar in an extended bear micro channel. Bears will probably use yesterday’s bar to take profits.
- Lastly, when you get a bull reversal bar late in a micro channel (July 8), it is often a warning that the micro channel may not last all that long and soon reverses.
- While the 12-bar bear micro channel is extreme, the odds favor a bounce, and the market will likely have to go sideways even if the bulls get a few bars to the upside. It is unlikely the bulls will be able to get an immediate reversal up. However, the market is at a logical price level (1.0000 big round number) to get a reversal up.
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
- The market went sideways, forming a triangle until there was midday failed upside breakout that led to a selloff into the close.
- The bulls had two big bull bars on the open. However, both had tails on top. In general, two consecutive breakout bars is enough to make the market always in long. However, bar 1 closed just barely above its midpoint. This increased the odds of bulls needing one more bar to make the market always in long.
- Whenever the market might always be in long (bar 2), but the bulls may need one more bar, traders will often sell the open close of the bar,2 betting the bulls will not get that one more bar.
- Bar 3 was a big enough reversal bar that most always in traders would exit below or get out below bar 4.
- The selloff down to 7:05 PT was a strong enough bear breakout to make the market always, in short; however, the two big bull bars (bar 1-2) was enough to create big up, big down, so big confusion, this means trading range open likely. Another way to say this is when the market has a big move on the open that reverses, it often does not form an opposite trend and has to go sideways for several bars.
- The market formed a triangle (blue lines) on the open, leading to sideways trading over 3 hours.
- At 10:05 PT, the market broke above the triangle, failed, and reversed down. This was also around the midday area, and often, the day will reverse around bar 40 (middle of the day).
- 11:35 (Bar 61) was an essential bar because it broke below the low of the past 42 bars. It was enough to surprise to increase the odds of a second leg down. The bulls tried twice to close the gap over the next four bars. However, it led to a measuring gap and a strong sell the close market.
- When the market is in a trading range, it is important to pay attention to breakouts that close above or below many bars. Generally, the more bars a breakout closes above or below, the greater the probability of a successful breakout.
- By the time the market got back to the low of the day at 12:00 (Bar 66), the market was always in short and sell the close so that traders would sell, betting the first reversal would fail and that the bulls would at least need a micro double bottom to reverse the market up.
- Most traders would exit above 12:45 (bar 75) since the selloff was climactic.
- Today was a good reminder of how quickly a breakout can happen in a trading range day. It is hard to switch from scalping to swing trading when the market has been sideways for most of the day.
- Today was a good day for the bears on the daily chart. The late rally into the close created a tail on top of the bar, which was disappointing for the bears. Whenever you sense confusion or disappointment, you should be thinking of trading range price action.
- Tomorrow, traders should expect more of the same trading range price action.
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.