Emini late August buy climax should pause today

Emini and Forex Trading Update:
Thursday August 27, 2020

I will update again at the end of the day.

Pre-Open market analysis

The rally over the past 2 days on the 5 minute chart was one of the strongest consecutive days of the year. That reduces the chance of a big selloff. It also reduces the chance of a 3rd consecutive big bull day.

What’s left? Trading range price action. The bulls have windfall profits and will take profits on rallies. They will prefer to buy pullbacks than at the market.

The bears know that and they will begin to sell reversals down from the high. But they also know that a strong bear trend is not likely and they too will take quick profits.

With traders buying selloffs, selling rallies, and taking quick profits, today will likely have a lot of trading range price action.

Fed Chairman Powell speaks today (6:10 am PT onwards). There is always the possibility that he will say something that will create a big move up or down. Also, it could last for several days. The risk is greater to the downside because the Emini is in a buy climax and we are at the end of the month when there is often some profit taking.

Overnight Emini Globex trading

The Emini is down 6 points in the Globex session. With the exhaustive buy climax of the past 2 days, there is an increased chance of trading range price action today. A trading range began midday yesterday and it might continue today.

Also, traders want to hear what Powell has to say. Unlike an FOMC day when traders know there is news exactly at 11 am PST, news from Powell can come at any point in his talk. Like an FOMC day, traders need to be ready for the 1st big move up or down to reverse. Also, they should assume that a big move can be in either direction. Finally, a big trend up or down can reverse after an hour or more. Be prepared for everything and do not be surprised and paralyzed by anything.

With the daily chart so overbought, there is an increased risk of a reversal down for several days. However, whenever there is an increased risk of something, there is always an increased risk of the opposite. This is because if something is obvious, there is often a lot of traders already positioned for it.

Traders talk about this as a possible crowded trade. There might not be enough others waiting to join in. Then, if their expected move does not happen, they begin to exit. This can result in a panic move in the opposite direction.

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 sideways for 4 weeks. This is a Breakout Mode pattern, which means there is always both a buy and a sell signal. The bulls see a double bottom bull flag or a triangle. The bears have a wedge top.

The EURUSD has been sideways for 4 days in a tight trading range. This is a smaller Breakout Mode pattern in the middle of the bigger pattern. There is a micro double top and a micro double bottom.

Fed Chairman Powell speaks today, which can be a catalyst for a breakout up or down. Also, there are only 3 trading days remaining in August. Traders are watching the monthly chart. If August has a strong bull close, they will expect higher prices in September. But if it closes near the low of the month, they will look for a 1 – 2 month pullback to the June 10 high, which is the breakout point.

Overnight EURUSD Forex trading

The 5 minute chart of the EURUSD Forex market has traded down in a couple legs today, but it is still within the 4 day tight trading range. Day traders expect reversals and are scalping for 10 pips.

Because the daily chart is in Breakout Mode, they are ready to swing trade if there is a breakout. With Powell speaking today, there is an increased chance of a big move in either direction.

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 sideways today. Although it rallied to a new high and just below 3500, it closed near the open. Because it was a doji bar on the daily chart and yesterday was a big bar in a buy climax, there is an increased chance of sideways to down trading tomorrow.

Tomorrow is Friday so weekly support and resistance can be important, especially in the final hour. The bulls want a weekly close at a new all-time high. They would like it to be above the 3500 Big Round Number.

There are probably no targets for the bears that are within reach. They would need a big bear day to get the week to close below the midpoint of the week.

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

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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.

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