Emini second leg up likely after strong upside breakout

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 9^th high, which was the start of the breakout below the June 2^nd lows.
• The next and most important target for the bulls is the June 2^nd major lower high. If the bulls can break above the June 2^nd 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 28^th) 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 2^nd 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 2^nd) of a larger double bottom (June 16 or July 14). This double bottom would project up to around the March 30^th high or higher depending on if one uses the July 14^th low or the June 17^th low.
• The bears hope the past three-day rally will lead to a 2^nd 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 2^nd high.
• Traders want to see how the breakout above the June 2^nd low looks. So far, the bulls have a strong upside breakout and have the potential to breakout far above the June 2^nd 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 2^nd high. It is a buy vacuum, which means the buying pressure could evaporate when the market reaches the target (June 2^nd), and the market begins to go sideways.
• Today will be interesting to see if the bulls start taking profits just under the June 2^nd high or will the market first break above the June 2^nd high before there is profit taking. If the market stalls just under the June 2^nd 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.

Here are several reasonable stop entry setups from Friday. I show each buy entry with a green rectangle and each sell entry with a red rectangle. Buyers of both the Brooks Trading Course and Encyclopedia of Chart Patterns have access to a much more detailed explanation of the swing trades for each day (see Online Course/BTC Daily Setups).

My goal with these charts is to present an Always In perspective. If a trader was trying to be Always In or nearly Always In a position all day, and he was not currently in the market, these entries would be logical times for him to enter. These therefore are swing entries.

It is important to understand that most swing setups do not lead to swing trades. As soon as traders are disappointed, many exit. Those who exit prefer to get out with a small profit (scalp), but often have to exit with a small loss.

If the risk is too big for your account, you should wait for trades with less risk or trade an alternative market like the Micro Emini.

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 5^th high was the breakout below the 2017 low and the bottom of the two-month trading range. This makes the July 5^th high is a magnet since the high of the bar was where strong bears came in. The market may want to test the July 5^th 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 27^th) 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.

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Trading Room

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.

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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.

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