Trading Update: Friday July 28, 2023
S&P Emini pre-open market analysis
Emini daily chart
- The bulls gapped up yesterday and sold off last in the day, creating a large outside down day. Yesterday was a big enough bear surprise that the odds favor a second leg down.
- The market has been above the moving average for well over 35 bars, and yesterday was an agreement that the market is too expensive.
- The moving average reflects the fair price, and bulls are happy to buy high and above the “fair price” (moving average) when momentum is driving the market up. However, once the moment disappears, traders will no longer be willing to buy high, and the market will begin to go sideways as traders decide they want to buy lower.
- Eventually, everyone wants to buy at the moving average, and the market often gets a sell vacuum.
- Yesterday’s bear breakout bar is strong enough that the odds favor a second leg down. The market will probably test the June 30th breakout point high and the 4,500 big round number.
- The bears want today to have strong follow-through selling after yesterday’s bear breakout. However, the bar is big, which means it is climactic and may lead to traders buying the close for a scalp. This would lead to a brief pullback and a second leg down.
- Overall, yesterday was enough of a surprise that the Bears will likely get a second leg down after any pullback.
Emini 5-minute chart and what to expect today
- Yesterday’s selloff into the close was climactic. There is a 75% chance of sideways trading lasting two hours, beginning before the end of the second hour (bar 24).
- There is a 50% chance of follow-through selling and a 75% chance of sideways trading, as mentioned above.
- There is only a 25% chance that today will be another strong small pullback bear trend day.
- Traders should expect the first two hours of the day to have a lot of trading range price action. This means traders should use caution and expect most breakouts to fail.
- Today is Friday, so weekly support and resistance is important. The market is near the open of the week is 4,575.25. This will probably be an important magnet today as bears want the market to close below it, creating a bear bar on the weekly chart.
- Traders should pay attention to the open of the day as the bears want follow-through after yesterday’s bear breakout, and the bulls want to prevent it.
- Lastly, today is Friday, which means there is an increased risk of a surprise breakout up or down in the final hours of the day as traders decide on the close of the weekly chart. Traders should be open to any possibility and must not deny the price action in front of them.
Yesterday’s Emini setups
Al created the SP500 Emini charts.
Here are several reasonable stop entry setups from yesterday. 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 near 4-year library of more detailed explanations of swing trade setups (see Online Course/BTC Daily Setups). Encyclopedia members get current daily charts added to Encyclopedia.
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 formed an outside down bar yesterday, closing below the June high.
- With the five consecutive bear bars down to July 24th, the odds were high that the market was in a trading range and was likely to close below the June 24th breakout point high.
- The bulls see a parabolic wedge (July 21st, July 25th, and today’s low). The bulls hope this will be the start of a reversal up; however, parabolic wedges are often minor reversals and typically lead to sideways trading. This
- the selloff down to July 25th was a big enough surprise that the odds were the Bears would get 2nd leg down. However, yesterday’s outside down bar is also a surprise, and it will likely have a 2nd leg down.
- Since the market is in a trading range, traders should expect the bears to become disappointed soon. This means that today may form a bull reversal bar and make the bears consider exiting shorts and looking to sell a pullback.
- If the bulls are going to form a reversal, they will need to build more buying pressure. At a minimum, the bulls will likely need 2-3 consecutive bull trend bars closing on their highs.
- Overall, traders should expect to see some profit-taking after yesterday’s outside down bar. However, the market will probably go sideways and not get a strong reversal due to the tight channel down from the July high.
Summary of today’s S&P Emini price action
Al created the SP500 Emini charts.
End of day video review
Today’s End Of Day review will be presented in the Trading Room and only available to the trading room subscribers.
See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.
Trading Room
Al Brooks and other presenters talk about the detailed Emini price action real-time each day in the BrooksPriceAction.com 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.
