Emini and Forex Trading Update:
Monday August 5, 2019
I will update again at the end of the day.
Pre-Open market analysis
Last week’s bar on the weekly chart was surprisingly big. A Bear Surprise Bar typically has at least a small 2nd leg sideways to down. However, after the 8 week bull micro channel, this reversal down will probably be minor on the weekly chart. A trading range for a month or two is still more likely than a bear trend.
I have been saying for 3 weeks that 2900 was a reasonable minimum target. The strength of last week’s selloff increases the chance that the reversal might continue down to the June low before the bulls return.
Because the selling has been extreme for 3 days, there will probably be a pause or a bounce for a few days this week. But traders should expect the 1st 30 – 50 point rally to fail. Traders are looking to sell the 1st strong rally.
With last week closing near its low, the Emini might gap down on the weekly chart today.
Overnight Emini Globex trading
The Emini us down 43 points in the Globex session. It will probably gap down on both the daily and weekly charts.
The momentum down on the daily chart is strong, but the Emini is now at the support I have been talking about for several weeks. The bull channel began with the June 12 low of 2879.25.
I have been saying that this is a reasonable target after the wedge top. It is also below the 2900 Big Round Number and near a 50% pullback from the 2 month rally. Furthermore, it is around a measured move down from the July 31 low.
How much longer can this extreme selling last? The Emini is probably near the end of its 1st leg down on the daily chart. Day traders expect a short-covering rally this week.
There is no bottom yet and this sell climax could last longer. But the bears have extreme profits. They will likely begin to buy back some of their shorts today or tomorrow. The short-covering could create a strong bull trend day for a day or two. Traders will sell the rally.
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 is reversing up strongly from both a wedge bottom and an expanding triangle bottom. The breakout below the 5 month trading range is probably failing, like every other new low for the past year. All prior rallies lasted at least 2 – 3 weeks, had at least 2 legs, and continued up for 200 – 300 pips. Traders will expect the same this time.
The bears had a double top bear flag in mid-July. They hope this rally reverses down at the July 25 high, which would be another double top bear flag. But the momentum up is strong. The rally will probably test the beginning of the wedge bear channel, which is the mid-July double top at around 1.1280. The bulls will buy the 1st 1 – 3 day selloff, expecting at least one more leg up to the target.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart rallied 70 pips in a tight bull channel over the past 6 hours. When that is the case, traders should only buy. It is impossible for the bears to make much money in a tight bull channel.
However, a tight bull channel is a buy climax and the rally is at the July 25 high, which is resistance. The bulls will begin to take some profits, which will result in a 20 – 30 pip pullback within the next few hours. After that, the bear scalpers will begin to trade.
But even then, a strong bull trend typically evolves into a trading range or a bull flag, and not a bear trend. Consequently, it will probably be easier to make money as a bull all day.
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 gapped down on the daily and weekly charts. It closed down more than 100 points for the 1st time in a year. After every strong rally, it sold off near the EMA. This was a bear channel day.
It is now below support on the daily chart at the June 12 low and a 50% pullback. However, the chart is in a free-fall. The bulls need to wait for at least a micro double bottom before buying.
Today’s gap might be a measuring gap. It projects down to 2800. There is now a 50% chance that the selloff will test the June low.
Because the selloff is strong, traders will sell the 1st 1 – 3 day rally. However, since today was a sell climax, there is a 75% chance of at least a couple hours of sideways to up trading tomorrow that begins by the end of the 2nd hour.
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.
