Emini and Forex Trading Update:
Tuesday August 20, 2019
I will update again at the end of the day.
Pre-Open market analysis
The Emini gapped up and rallied for the 1st half of the day. But there was a lot of trading range price action and the day closed exactly at the open. This formed a perfect doji bar on the daily chart and a sign of neutrality.
The Emini is near the top of a 2 week trading range. Also, the August selloff was strong enough to have at least a small 2nd leg down. Consequently, this rally will probably test below 2800 before making a new all-time high. It is therefore a bear rally.
Overnight Emini Globex trading
The Emini is up 3 points in the Globex session. While the momentum up over the past 3 days has been good, the Emini is near the top of its 2 week trading range and at the resistance of the 20 day EMA. Furthermore, yesterday was neutral. The bulls are losing momentum. Finally, this rally is probably only a bull leg in a developing 3 week range and not a resumption of the June/July bull trend.
Traders will begin to look for sell setups within a week or so. However, trading ranges often break through support and resistance before reversing. As a result, the rally might have to go above last week’s high before the bears take control again.
The momentum up favors the bulls, but the location favors the bears. This creates uncertainty and it will likely result in more sideways trading today and possibly for several days.
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
Friday was the 4th consecutive bears bar on the EURUSD daily Forex chart. Yesterday’s low was above Friday’s low. It was a pullback in a bear trend and therefore a Low 1 sell signal bar. Today fell below yesterday’s low, which triggered the sell signal and made today the entry bar.
While the bears want the 2 week bear trend to continue to far below the August low, every selloff and rally over the past year reversed within a few weeks. Consequently, the bulls will probably soon buy and create a 2 – 3 week rally. This is true even if the bears get a brief break below the August low first.
If the bears do not get a big bear bar today, they will be disappointed by yesterday’s bear flag. Many will start to buy back their shorts. Today will then form a micro double bottom with Friday’s low.
If today closes above the open, it will form a bull bar on the daily chart. A micro double bottom with a bull bar is a buy setup. Today would then be a buy signal bar for tomorrow. The bears might begin to buy back shorts and the bulls will begin to buy.
After 4 big bear bars, the daily chart might have to go sideways for several days before the bulls can take control. They typically have so stop the selling for a few days before enough buyers will come in to create a rally.
Overnight EURUSD Forex trading
Today traded below yesterday’s low and therefore triggered a Low 1 sell signal on the daily chart. However, it did not fall far below and it is now back above yesterday’s low. There so far is no enthusiasm on the part of the bears. They are unwilling to sell at the low. This means they now prefer to sell pullbacks than at the market, which is a sign that the selloff is losing momentum.
The overnight range has only been 20 pips. There is no energy up or down. Day traders are selling rallies and buying selloffs.
The bulls want today to close above its open so that today will be a buy signal on the daily chart for tomorrow. However, the bears want today to close below the open and below yesterday’s low. Furthermore, they want the day’s range to grow and for today to close on the low. That would increase the chance of lower prices tomorrow.
At the moment, that is unlikely. Instead, the daily chart will probably go sideways for a few days. Day traders therefore expect to scalp all day today, buying low and selling high.
Since the selloff on the daily chart is losing momentum and is now at the bottom of the 5 month range, a big bear day is unlikely. The bulls are forming a micro double bottom, but 3 sideways days in a tight range make a big bull day unlikely as well.
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 fell below yesterday’s low, testing the gap above Friday’s high. After an early rally, the Emini entered a bear channel. It closed near the low of the day. It did not close the gap above Friday’s high.
After a 3 day rally, this 2 day selloff will probably be a bear leg in the 3 week trading range rather than a resumption of the August bear trend. The bears need more and bigger days before traders believe that the bear trend has resumed. However, the odds still favor a move below 2800 before a new all-time high.
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, did you think there was a problem with the bear case this morning, given the tails on bars 2 and 3. Bulls where making money all the way down. Is this a good indication to take early profits and scalp for 2-4 pts.
thanks