Emini and Forex Trading Update:
Monday August 26, 2019
I will update again at the end of the day.
Pre-Open market analysis
Friday had a surprisingly strong selloff. When a selloff is that strong, there is a 60% chance of lower prices over the next few days. But there is a 40% chance that it is a bear trap. If the bulls get a strong bull bar today, traders will conclude that the selloff was in fact a trap. Today would then be a buy signal bar for tomorrow.
I wrote over the weekend that a big bear bar alone is not a reliable indicator of a bear trend. Friday was a big bear bar and last week formed a big bear bar on the weekly chart. Both charts are still in tight trading ranges.
Weak sell signal bar since bad context
The daily chart has had many big bars up and down for 3 weeks. Until there is a breakout, there is no breakout. Traders need more information and should assume that Friday is just another day in the range.
Last week was a sell signal bar on the weekly chart. This week might have to go below last week’s low to see if the bears are willing to sell at the bottom of the 3 week range. Typically, they will not and the bear breakout will fail.
The bulls would like the week to remain within last week’s range. If so, this week would probably have a bull body. It would then be a buy signal bar on the weekly chart.
The minimum that the bears want today is no bull body on the daily chart. If they get a bear body, it will increase the odds of lower prices this week. Remember, for the past several weeks I have been saying that the August selloff would probably get a 2nd leg down. The minimum goals for the bears are a break below the August low and below 2800.
Overnight Emini Globex trading
The Emini is up 14 points in the Globex session. Today’s close will be important because today is the follow-through day after Friday’s big selloff. A bull close today makes a continuation of the 7 day range likely. But if the bears get even a 1 tick bear body, the odds will favor at least slightly lower prices this week.
Friday was a Spike and Channel bear trend. There is usually a bull breakout above the bear channel and then a test of the start of the channel. It began with the pullback to around 2890 after Friday’s huge selloff. Finally, the bear channel typically evolves into a trading range.
Friday’s late reversal up and the overnight rally are probably the start of the transition. This increases the chance of a sideways’s to up day today.
Friday’s setups
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. 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 formed a big outside up day on Friday and a higher low reversal. But the bulls need a strong break above the EMA before traders will conclude that a 2 – 3 week rally is underway.
So far, today is a bear day at the EMA. If today closes near its low, the bears will see today as a sell signal bar for a failed reversal up. Friday will then be just a 50% pullback from the selloff 2 weeks ago, and the past 7 days will be a bear flag.
The past 7 days have been in a tight trading range. That is a Breakout Mode pattern. There is a 50% chance of a test below the August low.
Since every new low for the past year reversed up for 2 – 3 weeks, traders expect the same this time. What they do not know is if Friday was the start of a rally or if the bears will get a brief breakout below the August low first.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart sold off 45 pips at the start of the European session. But is has been in 15 pip tight trading range for 4 hours.
If the bears can get the day to close near its low, they will have a good sell signal bar on the daily chart. They do not need the day’s range to get bigger. Therefore, there is less incentive for a selloff in the US session.
The bulls will try to prevent today from forming a strong sell signal bar on the daily chart. Consequently, they will buy tests of the day’s low. They would like the day to close at least 20 pips above the low. That would reduce the chance of a big selloff tomorrow.
Can they reverse the overnight selloff? Probably not. The 15 pip range over the past 4 hours is a sign that there is no energy. Day traders are scalping and will continue to scalp unless there is a surprise breakout up or down.
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 formed a bull inside day today after Friday’s sell climax. It is a buy signal bar for tomorrow. The bulls hope Friday was just a bear trap and that today is the start of a resumption of the June/July bull trend.
More likely, it is just another leg in the 4 week trading range. Unless the bulls get a strong break above the August 13 high, the Emini will probably test below 2800 within a few weeks.
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.
