Emini breakout above February all-time high in Globex

Emini and Forex Trading Update:
Tuesday August 11, 2020

I will update again at the end of the day.

Pre-Open market analysis

The Emini gapped up on the weekly chart again yesterday, like 4 of the past 6 Monday’s. Because the gap was small, it closed early in the day.

The Emini broke above the Globex February high overnight. It will probably break above the day session all-time high today.

Yesterday was also the 9th consecutive bull bar on the daily chart. This is rare and therefore climactic. Traders should expect a 70% chance that today or tomorrow will close below the open. This is especially true since a pullback is common when a market breaks above important resistance.

If today is bear day, the Emini might pull back for a couple days. But 9 bull bars mean persistent bulls. They will probably buy the 1st 1 – 3 day pullback.

This kind of extremely bullish behavior is similar to the late 2018 rally. That abruptly ended with a 10% selloff. It is also similar to the 8 consecutive bull days that ended on June 5. The Emini sold off 9% in 5 days. Extreme buy climaxes have an increased chance of a sharp reversal. But, the reversal is usually minor.

Overnight Emini Globex trading

The Emini is up 17 points in the Globex session. It will probably open within a few points of the February all-time high. The bulls want a new high in the day session today. If they do not get it today, they will probably get it within a week or two.

After 9 consecutive bull days, today will probably close below the open. Therefore, if there is a strong rally to a new high today, there is an increased chance of a reversal down in the middle of the day. If today closes above the open, tomorrow will probably be a bear day.

Can today be a huge bull day? That is unlikely because of the 9 consecutive bull days. Sometimes an extreme climax ends with an especially big bull day. However, it is more likely that there will be a 1 – 3 day pullback and then another test of the February high. At that point, the bears might get a micro double top and then a deeper pullback.

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 been sideways for a couple weeks. With 2 sideways legs, it has met the minimum expectation of traders after the buy climax. If today closes near its high, today will be a buy signal bar for a small double bottom.

The bulls see the 2 week trading range as a bull flag. But it did not do much to relieve the buy climax. Consequently, if there is a new high within a week, it will probably only last a week or two. This trading range will likely be a Final Bull Flag. The new high should fail to get very far. Traders will look for a deeper and longer pullback after this extreme a buy climax.

While it is possible that the Small Pullback Bull Trend continues up to the 1.25 area at the February 2018 high with only 2 – 3 day pullbacks, that is unlikely.

The bears are still hoping that the double top will lead to a break below the trading range. They then want a measured move down to the March 9 high breakout point. However, last week’s high was a bull doji bar. That is a weak sell signal.

A trading range is a Breakout Mode pattern. Traders expect a 50% chance of a measured move up or down.

Overnight EURUSD Forex trading

The 5 minute chart of the EURUSD Forex market tested the August 3 low overnight and reversed up. The bulls want today to close near its high. Today would then be a buy signal bar on the daily chart in a bull trend. Traders would expect higher prices tomorrow.

While the EURUSD has been sideways for 4 hours, day traders have been buying pullbacks. After reversing up from a double bottom on the 5 minute chart at support, today will probably not reverse back down to the low. Traders expect either a trading range or slightly higher prices today.

The bears do not want today to close on its high. They therefore are selling rallies. But since they know a trend reversal down is unlikely, they have been scalping for 10 pips.

Today traded below yesterday’s low and then above its high. It is therefore an outside up day. Yesterday’s high will probably be a magnet all day. If the bulls can get today to close above yesterday’s high, tomorrow will probably be higher. If the bears can get today to close well below yesterday’s high, they would improve their odds for another leg down a break below the 2 week range.

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

The Emini poked above the February all-time high on the open and again later int the day, but then sold off sharply. After 9 consecutive bull days, traders expected today to close below the open and it finally did.

The Emini has rallied strongly for 5 months. The 9 day rally was a buy climax. Strong bull trends often end with buy climaxes. Traders are wondering if this is a double top reversal with the February high. If there is follow-through selling tomorrow, more traders will take profits. The profit taking could grow into a 10% reversal down.

I mentioned early in the day in the trading room that I went short today for a trade down on the daily chart. If I get a quick, big profit, I might take it. If tomorrow reverses up strongly, I plan to short more higher.

But the buy climax also is a sign of strong bulls. Traders might buy the 1st 1 – 3 day pullback. If so, the bears will have to wait from a 2nd reversal down from a micro double top with today’s high.

There will probably be a 10% selloff beginning this month, like after the 9 consecutive bull bars in January 2018 and the 8 bull bars in June 2020. However, the 9 bull bars in 2018 had 2 more brief legs up before the selloff began. There might be a little more up here as well before the pullback to 3000 begins.

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 Market Update page.

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