Trading Update: Wednesday July 27, 2022
Emini pre-open market analysis
Emini daily chart
- Bears ended the 8-bar bull micro channel yesterday and got a bear bar closing near its low and below the open of June 28. July 21 was a reasonable Buy The Close bar, so the market with Emini likely to test July 21 close soon.
- While this is good for the bears, they have not done enough to reverse the breakout above the neckline (June 28) of the double bottom (July 14).
- It is typical for breakouts above the necklines of double bottoms to get retested and appear like they are going to reverse, so right now, the odds favor a breakout pullback and at least a little higher.
- If the bears can get two to three more bear bars closing on below their midpoints, that might be enough to make the market always in short and a likely second leg down.
- The bulls still have the target of the June 2nd major lower high, which is almost the same price as the measured move projection, from the July 14 low to the June 28 high.
- The bears still want a reversal down, and to fall under the June 17 low, and the reality is that the bears probably will get there again, but it could be several months or next year. The daily chart is in a trading range, so traders should expect frequent reversals and disappointment for any swing trades.
- Overall, the bull had a reasonable Buy The Close bar on July 21. The odds favor a test of the high close to allow those Buy The Close traders to exit back at their original entry price (July 21 close) and with a profit on their scale in entries. This makes me think the market will go sideways over the next few days. The bulls also want to demonstrate strong buying after a test of the June 28 high, which would be a sign of strength.
Emini 5-minute chart and what to expect today
- Emini is up 30 points in the overnight Globex session.
- The overnight Globex session had a solid second leg up following yesterday’s end-of-day rally into the close. The Globex market has been sideways to up since then.
- Today will have a gap opening, so traders should be aware of the possibility of a trend from the open. If the bulls or bears get decent consecutive trend bars closing at or near their high/low, traders will conclude that the market will have the second leg in the direction of the breakout bars.
- More likely, today will have a sideways open as it often does, and the market will try and test the moving average.
- The day might be the opposite of yesterday, where the market gapped down and tried to break above the moving average several times on the open but failed, and the market got a bear breakout to the downside.
- Most importantly, most traders should not be in a rush to trade the open and consider waiting for 6-12 bars. Take yesterday, for example; if one waited for 6-12 bars, they would not have missed anything and would still have the opportunity to catch the downside breakout.
- Today is a FOMC day, so that the market may go sideways until the report at 11:00am PT.
- Traders should be flat an hour going into the report.
- During the release of the FOMC report, the market can move quickly and reverse frequently. Traders should strongly consider not trading the first two bars of the report. The reason is that a major report like the FOMC has the potential to reverse directions, even if the first bar is a strong trend bar.
- Most importantly, trade small during the report and do not be in denial of the price action. Everyone wants a strong breakout up or down during the FOMC report. However, the reality is the FOMC release will likely lead to disappointment and not a strong breakout. However, the report will usually lead to a swing trade if a trader is patient.
Yesterday’s Emini setups
Al created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The bears got a decent bear close yesterday.
- The bulls want a wedge bottom and hope that yesterday was just a test of the July 13 high and July 18 signal bar high (some bulls would buy above July 18 since it was a bull bar closing on its high).
- The bears need more for most traders to conclude the market is always in short. However, yesterday might be strong enough to lead to a second leg down.
- Traders will pay attention to today. Traders will want to see how strong the bears are here. If they can get another bear close that is not just a doji, that would increase the odds of a second leg down and test of the 1.0000 big round number. More likely, today will have a bull body and disappoint the bears.
- Overall, the market is probably going to test the 2017 high at some point soon. Even if the market has to reach the 1.0000 big round number first.
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 bull trend from the open that had trend resumption following the FOMC.
- The market had a buy-the-close rally on the open that led to sideways trading up until 7:50.
- The market formed a triangle at 7:50 that led to an upside breakout. With 8:05 closing below its midpoint, the most trader would look to buy a pullback such as the second entry (H2) at 8:30.
- Around 9:30, the market formed a wedge top, with the last push up to 9:30 being weak with lots of small doji bars. This increased the odds of a test of the moving average soon and a couple of legs sideways to down following the 9:30 rally.
- The market sold off and reached the apex of the triangle that ended at 7:50. After that test, the market continued sideways until the FOMC report at 11:00.
- The first FOMC bar (11:05) was a doji closing at its midpoint. This was a warning that the market would likely go sideways over the next several bars.
- The 11:10 bar was a big bear bar, but the bears needed a follow-through bar, and the 11:05 signal bar is terrible.
- The bulls formed a double bottom that led to a strong bull breakout at 11:40. This was a major surprise, and the odds favored a measured move up.
- The 11:45 bar was a second big bull bar which increased the probability of higher prices. The risk was very big, so traders needed to trade small or not trade at all.
- The rally up to 12:30 had consecutive buy climaxes, and the move was getting extreme. Also, many bulls would be happy to take profits on a strong close like 12:30.
- The market sold off into the close. When you get a buy the close rally that begins before 12:30, it usually does not all the way into the close.
- Today was a good FOMC day with a strong rally into the close. It is essential to treat the day as two parts and treat the FOMC release as a new day.
- Also, it is essential to respect the size of the bars. If one cannot trade small, just step aside and wait.
- Today was a big bull bar closing above the July 22 high. Bulls will want follow-through tomorrow, which would increase the chances of this being that rally that reaches the June 2 high, which is a major lower high in the bear trend that began this year.
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.
Can i ask why you marked a L2 at the and of the exhaustive buy climax?
The way i understand is in a bull trend you only look for a H2, so i like to know why this is a L2 for you?
Yes, you are correct. Most traders should exit longs below 12:50 and not short. It is an aggressive short for a scalp. Since the bulls were likely to give up below some bears will short but they are quick to make decisions and manage the trade.
EURUSD Test the 2017 Low I presume?
Yes, the market wants to test the 2017 low and probably will in the next few months.
Emini. Today’s 11:35 and 11:40 bars. Is it correct to expect the bulls to bet on a measured move (MM) based on the height of those two bars? If incorrect observation, can you please clarify how to view a MM from those bars, if at all? Thank you very much if you have time to respond.
I am assuming you mean the 11:40 and 11:45 bull breakout bars. But yes the odds favor a measured move up of those bars as they will likely influence the market for the next couple of days. When you get a breakout that large, it often will reach the measured move target over the next trading day or two but not intraday since the range is already big after the 11:45 close.