Trading Update: Monday July 31, 2023
S&P Emini pre-open market analysis
Emini daily chart
- The Emini reversed up after last Thursday’s (July 27th) large outside down bar. Today is the final trading day of July, which means traders should be open to the possibility of a surprise breakout up or down today.
- While the reversal up is good for the bulls, the upside is likely limited, and the best the bulls will get is probably sideways. This means that we are probably sellers somewhere above last Thursday’s high.
- Some bulls bought above last week’s high, hopeful that last Thursday’s upside breakout would be successful. Those bulls are now trapped after July 27th went outside down. Those bulls will likely be happy to exit breakeven around last week’s high.
- The daily chart is evolving into a trading range which means traders are becoming more interested in buying value rather than buying because the momentum up is strong. This means the odds favor a test of the moving average (blue line). This means the Emini will probably fall below the July 27th outside down bar and touch the moving average.
- Overall, traders should expect a 2nd leg down after the July 27th outside down bar; however, because the bull channel is tight, the market may go above the July 27th high before the bears get their second leg down.
Emini 5-minute chart and what to expect today
- Emini is up 8 points in the overnight Globex session.
- The Globex market has been in a bull channel for several hours.
- The bulls recently formed a strong upside breakout around 5:45 AM PT. However, the follow-through was met with the sellers.
- The bulls are hopeful that this will lead to a successful bull breakout of a bull channel. The bears will likely overwhelm the bulls, and the 5:45 AM PT bull breakout will fail and lead to a trading range.
- Traders should expect the open to have a lot of trading range price action. This means most traders should consider not trading for the first 6-12 bars. By considering not trading for the first 6 bars, a trader gains certainty on the day’s structure and can avoid any potential opening reversal common in the first half hour of the day.
- Most traders should focus on the opening swing that often begins before the end of the second hour. It is common for the opening swing to begin after the formation of a double top/bottom or a wedge top/bottom. This allows a trader to wait for the formation of one of the abovementioned patterns before placing a trade to catch the opening swing.
- Lastly, today is the month’s final day, meaning traders should be ready for anything. Institutions will be deciding on the close of the monthly chart, which increases the odds of a surprise move up or down today.
Friday’s Emini setups
Al created the SP500 Emini chart.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The EURUSD formed a parabolic wedge bottom (green line) at the July 28th low. The bulls are hopeful that the parabolic wedge bottom will lead to a sharp reversal up.
- However, most parabolic wedges should be seen as minor reversals. This is because a parabolic wedge is formed inside a tight channel, and breakouts of tight channels are often minor reversals that lead to sideways trading or resumption of the bear channel.
- Since the market is in a trading range, the bears will probably be disappointed soon. Typically in a trading range, once one side has done something strong, they are often disappointed. The bears have a large outside down bar and a six-bar bear microchannel.
- Overall, traders should expect the trading range price action to continue. However, since the bulls have a parabolic wedge within an overall trading range, it can potentially disappoint the bears and rally for a couple of legs.
Summary of today’s S&P Emini price action
Richard created the SP500 Emini chart (Al travelling).
End of day video review
Here is YouTube link if video popup blocked:
See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.
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.