Emini breaking below bull trend line and parabolic wedge climax

Emini and Forex Trading Update:
Thursday July 18, 2019

I will update again at the end of the day.

Pre-Open market analysis

Yesterday was a spike and channel bear trend day on the 5 minute chart. Also, it was a surprisingly big bear day on the daily chart. A Bear Surprise Day typically has at least a small 2nd leg sideways to down within a week.

But when a Bear Surprise Day forms in a bull trend, the follow-through on the next day is usually disappointing for the bears. Consequently, today will probably not be a big bear day. In fact, there is an increased chance of at least a small bull day. This would would disappoint the bears who want a strong follow-through day after yesterday’s big bear day.

They are hoping this reversal is the start of a bear trend. More likely, it is the beginning of a 2 – 3 week pullback in a bull trend. The targets are the higher lows in the month-long bull channel. The June 12 low around 2900 is the lowest likely goal.

Pullbacks typically lack consecutive big bear trend days. However, if the bears get another big bear day today, that will increase the chance of a bigger reversal, like down to the June low.

If this week trades below last week’s low, this week will be an outside down bar on the weekly chart. That would be a stronger sell signal bar on that chart. After a 7 week bull micro channel, a 2 – 3 week minor reversal is more likely than a bear trend.

Overnight Emini Globex trading

Since yesterday was a sell climax on the 5 minute chart, there is a 75% chance of at least a couple hours of sideways to up trading that starts by the end of the 2nd hour. Traders expect a disappointing follow-through day for the bears. There is therefore an increased chance of at least a small bull trend today. Day traders will watch for a reversal up in the 1st 2 hours.

There is a 25% chance of another big bear day today. If the bears get it, it will increase the odds of a bigger correction. A reasonable target would be the June low around 2750.

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 has been in a trading range for 5 months. There is therefore always going to be both a reasonable buy and sell setup. The bears want a break below the May low and then a measured move down from a head and shoulders top. They hope that last week’s lower high is the first in a series of lower highs and a resumption of the yearlong bear channel.

The bulls have a double bottom and a higher low after a strong rally in June. This is a double bottom higher low major trend reversal. It is also the right shoulder of a bigger head and shoulders bottom. They need a break above the June high, which is the head.

It is important to note that every new low over the past year reversed up. Consequently, even if the bears get a break below the May low, it will probably fail and there will then be a rally lasting 2 – 3 weeks, like every other breakout in over a year.

The chart is still in a trading range and it continues to reverse every few weeks. There is no sign that this is changing.

Traders are deciding whether this week will go below last week’s low and become an outside down week. If it does and remains small, it will not be a sign of strong bears. More likely, next week would go sideways for a third week and form a small breakout mode pattern on the weekly chart.

Overnight EURUSD Forex trading

The EURUSD 5 minute chart reversed down from above yesterday’s high overnight. While yesterday was a buy signal bar on the daily chart, there is still room down to the neck line of the head and shoulders bottom. Consequently, traders are not convinced the bottom is in. In addition, the 2 day selloff was strong. Many bulls want a micro double bottom and a 2nd buy signal.

The 5 minute chart has been in a trading range for 2 days. But, last week’s low is a magnet below. With the strong momentum down on Tuesday, there is a 50% chance that today or tomorrow will trade below last week’s low.

However, since last week was small and this week so far is small, and the chart is at the bottom of a month-long trading range, there will probably be buyers below last week’s low. The odds are against a big move up or down today.

Summary of today’s S&P Emini futures price action and what to expect tomorrow

I will post chart after the close.

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

I said that today had an increased chance of being a bull trend day after yesterday’s sell climax. Today sold of and then reversed up strongly. The rally will probably have at least a little follow-through over the next few days.

Today is a buy signal bar for tomorrow. It reduces the chance of a 2nd leg sideways to down after the parabolic wedge top on the daily chart.

See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.

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Trading Room

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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.

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