Emini and Forex Trading Update:
Thursday July 16, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini yesterday opened with a big gap up and therefore triggered the High 1 bull flag buy signal. After selling off and barely closing the gap, it rallied to back near the open of the day. It was a trading range day. That is a weak entry bar for the bulls.
Traders continue to expect a test above the February 24 high, which is the bottom of a big gap on the weekly chart. The Emini will probably get there within a week, even if there is a day or two pullback before then.
But will it make a new all-time high? If it enters the gap, there will be a 50% chance of a new high within a month. But whether or not there is a new high, traders should expect a pullback to the middle of the 3 year trading range ahead of the November election. Since the Emini is around where it sold off in February, traders wonder if it will sell off again from this level.
Double top but weak sell setup
The bears see yesterday as a sell signal bar for a micro double top with Monday’s high. They also see the 3 week rally as forming a double top with the June high.
But yesterday was only a bear doji bar. That is a weak sell signal bar. Also, the February 24 gap is a strong magnet above. Consequently, traders expect at least slightly higher prices before there will be a reversal down.
Overnight Emini Globex trading
The Emini is down 25 points in the Globex session. It therefore might gap below yesterday’s low. If it does, the gap will be small. Small gaps typically close in the 1st hour and are insignificant.
Traders know that the Emini’s 4 month rally has been extreme and it is now in the area where it sold off in February. That increases the chance of a big selloff again. It can come at any time.
But with yesterday being a weak sell signal bar and with the February 24 gap being a strong magnet above, traders expect at least slightly higher prices over the next few days. This is true even if today is a bear trend day. More likely, today will continue yesterday’s trading range behavior and have at least one swing up and one swing down.
Yesterday’s setups
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. I rarely also show limit order entries and entries on the close of bars. I do not want the lines to be distracting. If they are longer, I make them dotted. But, they have to be visible, so I make the shorter ones solid. Buyers of 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.
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
The EURUSD Forex market on the daily chart has been in a Small Pullback Bull Trend since June 19. But it is also at the top of a yearlong trading range and the rally is a possible wedge.
If the bears get a reversal from this area, there would be a double top with the March 9 high and a wedge top. That would likely lead to a couple legs down over the next few weeks. At a minimum, the bears would expect a test of the June 9 bottom of the June trading range.
The monthly chart (not shown) has been in a bear channel for 2 years and a trading range for 1 year. If the bulls can get consecutive closes on the daily chart above the March 9 high, traders will conclude that the bear trend has ended. The monthly chart would then be in a trading range and possibly a bull trend. Therefore, what happens over the next couple weeks is important for the monthly chart.
There is no top yet and there still is room to the March 9 high. Traders expect at least slightly higher prices.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market overnight sold off to below yesterday’s low, but reversed back up to the open of the day. The bulls want the day to close near the high so that it would be a stronger buy signal bar on the daily chart.
The daily chart is in a Small Pullback Bull Trend. Every time there is a one or two day pullback, the bulls see it as a buy signal. They want today to be another buy signal on the daily chart.
Will today be a good buy signal bar on the daily chart?
Today’s range has been small. The bulls do not need a big bull trend day. They just want today to close above the open so that there will be a bull body on the daily chart. That would attract more buyers tomorrow.
The bears need more than a small bear body if this is going to be the start of a reversal down. Since there already has been a reversal up overnight, the bears will probably not get a reversal down today.
They know today will be a buy signal bar on the daily chart. But they want it to be weak. If they can get the day to close below the open, the candlestick on the daily chart will have a bear body.
Traders would be less willing to buy tomorrow. The bears might then be able to create a micro double top within the next few days. If they can, there will have a better chance of getting a reversal down.
With today’s range being small, day traders have been scalping. Because of the reversal up a few hours ago, day traders will remain more interested in buying pullbacks than in selling rallies until the EURUSD begins to go sideways.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Here are several reasonable stop entry setups for today. I show each buy entry with a green rectangle and each sell entry with a red rectangle. I rarely also show limit order entries and entries on the close of bars. I do not want the lines to be distracting. If they are longer, I make them dotted. But, they have to be visible, so I make the shorter ones solid. Buyers of 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.
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.
End of day summary
The Emini traded below yesterday’s low, triggering a weak sell signal on the daily chart. It then went sideways and today was a trading range day. There was a late rally that failed and today closed just below the open.
Today is a High 1 bull flag buy signal bar for tomorrow. But it is small bear doji and yesterday was a bear doji. That reduces the chance of a big rally tomorrow.
The bears are hoping that the micro double top is the start of a reversal down to the middle of the 3 month rally. But with a weak sell signal bar yesterday, a weak entry bar today, and a strong magnet above, any reversal down will probably be minor. Traders expect a test into the gap above the February 24 high within a week.
Tomorrow is Friday so weekly support and resistance can be important, especially in the final hour. The Emini has been oscillating around the open of the week so that is a magnet. With the February 24 high a magnet above, the high of the week and the June high are magnets above.
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
Traders can see the end of the day bar-by-bar price action report by signing up for free at BrooksPriceAction.com. I talk about the detailed S&P Emini futures price action real-time throughout the day in the BrooksPriceAction.com trading room. We offer a 2 day free trial.
Charts use Pacific Standard Time
When I mention time, it is USA Pacific Standard Time (the Emini day session opens at 6:30 am PST, and closes at 1:15 pm PST). You can read background information on the intraday market reports on the Market Update page.
I believe this has been answered before, but I don’t see on my charts the e mini being 9 points away from the weekly feb 24 gap. I see much more than 9 points away from that gap.
I use continuous contracts, not the front month.
Al,
On the daily charts the ES ended up being a low 1 entry bar while on the SPX the day ended up being a high 1 buy signal. Which chart has the better predictive power going forward?
Thank you.
I prefer the Forrest Gump approach. I trade what is in front of me. Traders should not think too much because they will never place a trade. I’m a doctor. My diagnosis is Analysis Paralysis.
Many markets are highly corrected, yet they often show opposite patterns. The same is true with timeframes. All I care about it the chart on the screen.
I never want to think about reconciling related markets and different timeframes. If the pattern in front of me is good, I’m going to trade it.