Emini and Forex Trading Update:
Friday August 7, 2020
I will update again at the end of the day.
Pre-Open market analysis
Yesterday traded above Wednesday’s high and below its low and therefore was an outside day. It then traded back above yesterday’s high and became an outside up day. It was a big outside up day on the daily chart.
That usually increases the chance of higher prices on the next day. But after 7 consecutive bull days on the daily chart, the bears want today to close below the open. If the Emini is near the open in the final hour, it might get drawn to it. Then, there will be a fight over whether it closes above or below.
When the outside up day is at the top of a buy climax, the next day is usually not a big bull day. If the next day trades above the outside day, it typically will not close far above. Also, the day after a big outside day is often an inside day.
Because yesterday ended with a buy climax, traders will expect at least a couple hours of sideways to down trading to begin by the end of the 2nd hour.
Today is Friday so weekly support and resistance can be important, especially in the final hour. The bulls want a new all-time high.
Overnight Emini Globex trading
The Emini is down 6 points in the Globex chart. It was in a trading range for the final hour yesterday. Also, there will probably be at least a couple hours of sideways to down trading today that starts by the end of the 2nd hour.
Since today will probably close below the open, day traders do not expect a big bull trend day. If it rallies early and trades above yesterday’s high, it will probably be unable to stay far above. Day traders will look for a reversal down to at least test the open later in the day.
Even though yesterday was a big bull day, today could be a big bear day. This is especially true since the Emini is just below the resistance of the all-time high. Also, today will probably close below the open.
Entering the day, there is uncertainty. Day traders know 7 consecutive bull days is unusual. But they also see that yesterday rallied strongly and they know that the all-time high is within reach today. This increases the chance of a trading range open for the 1st couple hours. There is also an increased chance of at least one swing up and one swing down today.
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 rallied to a micro double top at the resistance of the September 2018 high. That was the start of the 2 year bear channel. Since the rally is a nested wedge, traders expect a couple legs down to the 20 day EMA over the next two weeks.
The selloff could reach the June 19 low and last several weeks. There is a 30% chance of a major trend reversal into a bear trend.
At the moment, after the bulls finish their profit taking, they are planning to buy again support. That is at the EMA and the June 10 high breakout point, or maybe the June 19 low.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market sold off again overnight from just below 1.19. It has tested that price and reversed down several times over the past week.
The bulls are hoping that the 2 day selloff is just a bull flag. But they need today to close near its high to become a buy signal bar for tomorrow on the daily chart. They have been buying 1 – 2 day selloffs, but have been unable to break above 1.19.
The bears are hoping that yesterday will be the high for at least the next couple of weeks. They have been selling rallies for the past week and they will continue to do that unless the bulls break strongly above 1.19. They will try to get today to close nears its low. That would increase the chance of lower prices next week.
With the bulls buying selloffs and the bears selling rallies, the EURUSD has been in a trading range for 2 weeks. Day traders will continue to look for small profits until there is a strong breakout up or down. The odds favor a selloff over the next couple weeks.
Today is Friday so weekly support and resistance are important. So far, the week has a small bull body and big tails up and down. The bears will try to close the week near the open. It would then be a doji bar on the weekly chart. That would increase the chance of lower prices next week.
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
As I said was likely, there were sellers above yesterday’s high and the open of the day was a magnet all day. Despite the trading range price action, the Emini closed on the high of the day and of the week. Since 3 of the past weeks gapped up, there is an increase chance of another gap up on Monday. There is a small chance that it could gap above the February high.
Today was the 8th consecutive bull day on the daily chart. That is unusual and it makes a bear day likely on Monday or Tuesday.
The bears are hoping for a double top with the February all-time high. They want an abrupt reversal down like after the 8 bull day rally that ended on June 5. There was a 9% selloff over the next 5 days.
While this is possible, it is more likely that the bulls will buy the 1st 1 – 2 day pullback and that the Emini will make a new high next 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.
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 Market Update page.
4 dojis at the EMA and after a wedge rally to the EMA. But reasonable buy if a trader put his stop below 1 or scaled in below 1.
Al, why do you not consider, bar 8 reversal bar H1 a good sigal bar?
thanks
Marco