Emini and Forex Trading Update:
Thursday August 29, 2019
I will update again at the end of the day.
Pre-Open market analysis
The Emini triggered a minor sell signal yesterday by trading below Tuesday’s low. But, I said that it was a weak sell setup since it was a big bear bar in the bottom third of a 4 week trading range. Traders bought below Tuesday’s sell signal bar and yesterday was a bull trend day.
For the bulls, yesterday is now a buy signal bar for today. It formed a micro double bottom with Monday’s low, which increases the chance of at least a small rally.
It is important to note that there are only 2 trading days left in August and that July triggered a reliable buy signal on the monthly chart. Today and tomorrow might rally to undo much of August’s selloff.
Will the overnight China news lead to a resumption of the June/July bull trend? It might, but traders will assume that the institutions have already factored in everything involving a possible trade deal, including the timing. Therefore, the overnight news might not have a lasting effect.
Overnight Emini Globex trading
The Emini is up 26 points in the Globex session. Today will probably gap up above yesterday’s high and the 2900 Big Round Number.
A big gap increases the chance of a trend day. If there is going to be a trend day, a bull trend day is slightly more likely than a bear trend day when the gap is up.
Because there are only 2 days left in August, monthly support and resistance could be magnets for the next 2 trading days. At a minimum, the bulls want the month to close above its 2917.38 midpoint. Traders would see that as a sign that the bulls owned the month, despite the strong selloffs.
The bulls would prefer that the monthly candlestick has a bull body. That would require tomorrow closing above the 2981.25 open of the month. However, that might be out of reach by tomorrow’s close.
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. 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.
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.
EURUSD Forex market trading strategies
The EURUSD daily Forex chart is continuing its 4 day selloff after last Friday being a big outside up day. The overnight news about the China trade war is good for the US and therefore relatively bad for every competitor. However, traders should assume that the institutions have already mostly factored in any China news. That reduces the probability of a huge move up or down on the daily chart.
The 4 day selloff increases the chance that last week’s rally was just a bull trap and a bear flag. Traders now expect that the selloff might continue to below the August low.
However, there have been many news events over the past year and many new lows in the yearlong bear channel. Each bear breakout reversed up within a few days. It then led to a 2 – 4 week bear rally. Consequently, traders will assume that the August selloff will behave the same way.
Also, even if the bears get a strong breakout below the bear channel, there is only a 25% chance that it would lead to an accelerated bear trend on the daily chart. Traders know that there is a 75% chance of it reversing up within 5 days.
That would be an exhaustive sell climax and it would probably lead to a breakout above the bear channel. If so, the yearlong bear channel would end and transition into a trading range, which could last many months.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart traded below yesterday’s low overnight. But the overnight range has been small and the entire 4 day selloff is a Spike and Channel bear trend on the 5 and 60 minute charts. There is typically a bull breakout above the bear channel and then a transition into a trading range. Day traders therefore expect a bounce today or tomorrow.
With the past 2 days and the overnight range being small, there is currently no energy. Day traders have been scalping while waiting for a breakout.
When there is a bear channel, there is only a 25% chance of a successful bear breakout and a stronger bear trend. Consequently, day traders expect a rally within a few days. They are ready for either a bull breakout or a bear breakout that reverses up. Less likely, there would be a successful bear breakout and a strong bear trend.
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. 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.
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.
End of day summary
The Emini had a big gap up to the midpoint of the August range. It traded around it for an hour and then broke to the downside. It reversed up from a wedge bottom at the EMA. The selloff was also a 50% pullback from yesterday’s higher low. The rally then tested the August 23 sell climax high and went sideways for the rest of the day.
Tomorrow is the last day of the month. Two important monthly targets are the midpoint of the month and the open of the month. A close above either would strengthen the bull case. The open of the month is far above and likely beyond reach tomorrow. It is important to remember that until there is a breakout of the month-long trading range, there is no breakout and traders will look for reversals.
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 Intraday Market Update page.
Hi Al,
After the large gap up this morning, do you still think it’s likely that we go below 2800 before we make a new all-time high?
Thanks,
John
The Emini is still in a trading range. Also, the prospect of a China deal is already priced in.
I still think the odds favor a move below 2800 before a new high, but it is now close to 50-50. In a trading range, the strong legs up always move the probability in the direction of the bulls and the strong legs down favor the bears. But until there is a breakout, there is no breakout.
The most important technical factor is the oo on the monthly chart. I keep writing about it. It makes a new high likely, but there still might be more of a pullback 1st.
Hi Al,
Thanks for your comments. I wanted to ask when do you get out during the failed reversal and when trend is so strong right from open? Entries i understood but when to get out? Any pointers would be very helpful
Thanks,
Nitin
On the open, any strong move has a 50% chance of an immediate reversal. If I want to buy the reversal up, I either buy above the bull reversal bar, or I wait for consecutive bull bars closing near their highs (Buy The Close bull trend), or I wait to buy a pullback.