Emini breakout but 50 point pullback likely within 2 weeks
I will update again at the end of the day.
Pre-Open market analysis
The Emini rallied yesterday in a small pullback bull trend. It continued its breakout above the March high. There was an unusually strong late bull breakout. While the bulls want a measured move up, the bears want it to be an exhaustive end of the July rally. When a breakout is especially big like this, the odds favor at least slightly higher prices over the next few days.
But, the rally on the 60 minute chart is extreme. Therefore, there is a 50% chance of a pullback of a 50 – 70 point pullback within the next few weeks. The next few days will be important. Traders will watch to see if there is strong follow-through buying. More likely, today will be a pause day as exhausted bulls wait to see if the bears can create a reversal. If the bears fail, the bulls will buy again for another leg up.
Overnight Emini Globex trading
The Emini is down 4 points in the Globex market. It has been in a very tight trading range overnight. While yesterday had a huge late bull breakout, it also had a big reversal down into the close. This is a Big Up, Big Down pattern, which creates Big Confusion. That is a hallmark of a trading range. Therefore, there is an increased chance that the overnight trading range will last all day.
Because yesterday’s closing rally was so unusual, there is an increased chance of a big day up or down today. However, the odds favor at least an early trading range.
Yesterday’s setups
Here are several reasonable stop entry setups from yesterday. I sometimes also show limit order entries and entries on the close of bars. 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 in a position at the moment, these entries would be logical times for him to enter.
EURUSD daily Forex chart at apex of triangle at support on weekly chart
The EURUSD daily Forex chart’s legs up and down are now lasting only a couple of days. The odds are that it will break out of the triangle within a week.
The EURUSD daily Forex chart is at the apex of a month-long triangle that is within a 2 month trading range. Since the legs up and down are now lasting only a couple days, the odds favor a breakout within a week. The 1st breakout of a triangle fails and reverses 50% of the time within a few bars. Also, there is about a 50% chance that the successful breakout will be up and 50% chance it will be down.
Here, the probability is slightly higher for the bulls. This is because the selloff before the triangle was climactic and the triangle is at support on the weekly chart. In addition, there are high probability magnets above. These are the June 19 sell climax high and the May 14 test of the 1.20 Big Round Number.
Even if the bears win, a triangle late in a bear trend is usually the Final Bear Flag. That means that the selloff is likely to reverse back up within a month and come back into the triangle. More likely, that rally would continue up to the targets above.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart has been in a 40 pip range since yesterday’s close. Since the daily chart is at the apex of a triangle, day traders are scalping reversals for 10 pips. But, they know that a big breakout up or down can come at any time. If there is a big breakout on the 5 minute chart, the day traders will switch to swing trading. That breakout will probably come within a 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 sometimes also show limit order entries and entries on the close of bars. 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 in a position at the moment, these entries would be logical times for him to enter.
The Emini formed a small bull inside day today. In addition, the bodies stayed above yesterday’s breakout point and the low stayed above Tuesday’s high. All of this increases the odds of higher prices over the next few days. However, the bears will try to create a micro double top with Wednesday’s high within the next few days. They will need a bear body to make traders willing to sell.
See the weekly update for a discussion of the price action on the weekly candlestick chart and for what to expect going into next week.
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.
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.
