Trading Update: Monday August 1, 2022
Emini pre-open market analysis
Emini daily chart
- The bulls have three strong consecutive bull trend bars on the daily chart with a second leg up likely.
- The first target for the bulls has been met: the June 9th high, which was the start of the breakout below the June 2nd lows.
- The next and most important target for the bulls is the June 2nd major lower high. If the bulls can break above the June 2nd high, the market would either be in a bull trend of a trading range or no longer in a bear trend.
- The bulls broke above the neckline (June 28th) of the double bottom (July 14), so they will expect a measured move up from the double bottom low to the neckline, which leads to 4,176.25.
- The bulls have the potential to breakout far above the June 2nd high. If the bulls break far above the June 2nd high, traders will wonder if the bulls are getting a breakout above the neckline (June 2nd) of a larger double bottom (June 16 or July 14). This double bottom would project up to around the March 30th high or higher depending on if one uses the July 14th low or the June 17th low.
- The bears hope the past three-day rally will lead to a 2nd leg trap; however, the three-day bull breakout is too strong for many bears to be eager to sell.
- The bears will need a micro double bottom at a minimum to be eager to sell.
- Right now, the market is buy the close, and the odds favor a second leg up and a test of the June 2nd high.
- Traders want to see how the breakout above the June 2nd low looks. So far, the bulls have a strong upside breakout and have the potential to breakout far above the June 2nd high if they can continue the current momentum up.
- Overall, traders must remember that bear channels typically evolve into trading ranges, which means that the current bull breakout could be a buy vacuum test of the June 2nd high. It is a buy vacuum, which means the buying pressure could evaporate when the market reaches the target (June 2nd), and the market begins to go sideways.
- Today will be interesting to see if the bulls start taking profits just under the June 2nd high or will the market first break above the June 2nd high before there is profit taking. If the market stalls just under the June 2nd high, that would be a sign of hesitation (weakness) by the bulls.
Emini 5-minute chart and what to expect today
- Emini is down 28 points in the overnight Globex session.
- The Globex market has been in a trading range for most of the overnight session.
- The bears hope today will gap down and close below the open of the day, which would end the three-day bull streak on the daily chart.
- As usual, traders should expect a trading range open and a limit order market.
- Traders should look for some swing pattern such as a double top/bottom, wedge top/bottom, or wait for a strong breakout with follow-through.
- It is essential to remember that most breakouts on the open fail and do not go that far, which means most breakouts on the open fail.
- Traders should be cautious on the open and not too eager since it is easy to take a few big losses in the first hour and spend the rest of the day trying to get back to break even.
- If the open is a tight trading range, there will eventually be a breakout or good swing trade.
- If the market is a trend from the open, there will be plenty of time to enter the trend’s direction. If a trader believes the market is in a trend from the open, they can consider placing a small position on in the market.
- Lastly, since most days go sideways, a trader can consider waiting for 6-12 bars before placing a trade.
Friday’s Emini setups
Al created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The EURUSD is in breakout mode at the moving average (blue line), which means the probability is close to 50% for both the bulls and bears.
- The bulls are doing a good job keeping the market at the moving average and collecting a decent amount of bull closes. This slightly increases the probability that the bulls may get the upside breakout above the moving average.
- The moving average is a fair price, and the bears are not eager to sell at the moving average. The bears may want to sell higher, driving the market up to the 2017 low and bottom of the May – June two-month trading range. These targets are about 110 pips away from the current price.
- The bulls see the tight trading range at the moving average (blue box) as a double bottom bull flag. They want a breakout above the neckline on July 21 and a measured move up the tight trading range which would project up to July 5th high.
- The July 5th high was the breakout below the 2017 low and the bottom of the two-month trading range. This makes the July 5th high is a magnet since the high of the bar was where strong bears came in. The market may want to test the July 5th high to see if strong bears will return at this price level.
- The bears want the opposite of the bulls. They see the tight trading range (blue box) as a double-top bear flag, and they want a breakout below the neckline (July 27th) and a measured move to below the July 14 low.
- Even if the bears get their bear breakout, there will probably be buyers back at the 1.0000 big round number, and the market will have to rally around to the 2017 low and bottom of the two-month trading range.
- The most important thing to remember is that the market is in a 9-bar tight trading range, so the probability is not high for both the bulls and the bears.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Al created the SP500 Emini charts.
End of day video summary
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.
Great to see you posting videos on BTC now! I watch all of your Youtube Emini Daily reviews and get so much value out of them. Thank you to you, and of course, Al, for the continued insight and knowledge that you share.
Very insightful – hope to see the Emini End of Day reviews more frequently.
This is great!
Brad, thanks for the report. Like the way you describe the possibilities of what the market can/may do. I need you please to clear for me the rationale of DB Neckline wherbuy the location of the neckline is prior to the 1st leg of the DB. Re daily possibilities you have mentioned that June 2nd is the neckline of DB june 16th and July 14th. I do get the MM possibilities from both bottoms but pattern wise it doesn’t add up for me…
If the market breaks far from the June 2nd high traders will argue it is a neckline of a double bottom with the low of the year. It is a possible trading range top. What I mean is if the market fails to break far above the June 2nd high and reverses back down, traders will call it a possible double top. So, if the market breaks above the June 2nd High, that will mean the double top failed at the June high. Does that make sense?
Hi Brad, can you elaborate why a short below 63 was not a valid sell setup? Thank you
Hi James, before Brad answers, may i say, any wedge top, DT, with a good sell signal bar is a valid short entry. Although low probability as its a reversal early in a bull channel.
Bar 63 is a wedge top, and while it is a bear flag, what is it a bear flag of? A leg in a bear trend or a leg in a Trading range? Here it is a wedge bear flag in a likely trading range, increasing the odds of an upside breakout.
Also, the 63signal bar is big, lowering the probability for the bears. Notice how tight the channel is from bar 52 to 63. The bears are not making money below bars which increases the likelihood of the bears giving up, which is what happened on bars 65-66.
The bulls were also getting good buying pressure up to bar 62 (lots of bull bars closing near their highs). The bears who did sell below 63 were disappointed below bar 64 and gave up during 65. Notice how bears that sold below 63 were able to exit breakeven after they were disappointed with bar 65.
I think it was also the end of the 1st leg up from the wedge HL-DB that was also tight bull channel from the bottom of TR day thus 2nd leg up is more likely