Emini and Forex Trading Update:
Wednesday July 22, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini gapped up yesterday, but went sideways for most of the day. The selloff at the end of the day closed yesterday’s gap up.
Because yesterday had a bear body, it is a sell signal bar for today. But the bull channel on the daily chart is tight and yesterday had a big tail below. Also, yesterday was the 2nd consecutive close above the February 24 high. This is a weak sell setup.
Because yesterday is a sell signal bar, today might have to go below its low to see if there are more sellers than buyers there. Remember, traders know that the gap on the weekly chart might be where the 4 month bull trend ends. However, the bears will probably need at least a micro double top on the daily chart before they can begin a reversal. Therefore, the bulls will buy the 1st 1 – 3 day pullback.
I have been saying that the Emini might have to go sideways for a week or more in the February gap on the weekly chart. It could take a while before traders decide if the 4 month rally will reach the old high or reverse back down to the middle of the 3 year trading range.
Therefore, today will probably be more of a trading range day and not a big bear day. Traders expect at least one swing up and one swing down.
Overnight Emini Globex trading
The Emini is down 4 points in the Globex session. The bulls hope that the 2 reversals up at the end of yesterday will lead to a rally.
But the late selloff was strong enough for traders to expect a 2nd leg sideways to down. Also, traders know that today might have to go below yesterday’s low to trigger the sell signal on the daily chart.
However, there will probably be buyers not too far below because the daily chart is in a Small Pullback Bull Trend. Consequently, today will probably not be a big bear day.
Also, after yesterday’s strong selloff, there is a reduced chance of a big bull day. If today is not going to be a big bull day or big bear day, it will probably have a lot of trading range price action. This might continue for a week or more.
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 is breaking strongly above the top of its yearlong trading range. Today so far is the 2nd consecutive big bull bar closing on its high and above the March high. If today closes near its high, the 2 day breakout will be strong enough for traders to expect at least a small 2nd leg up after the 1st 1 – 3 day pullback. But if it closes below its midpoint, there is an increased chance that a 2 week pullback could begin this week.
When an exceptionally strong breakout comes late in a bull trend, it is usually climactic. That means it typically will attract some profit-taking, usually after a brief 2nd leg up.
Since this is the 3rd leg up, the bears want a major reversal down from a wedge top. But it is a strong breakout of a long base. Consequently, the best the bears can probably get over the next few weeks is a 2 week pullback to the June 10 high. That is a breakout point and it is around the EMA. Traders now expect the rally to continue up to the September 2018 high of around 1.18 over the next few months.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market has been continuing yesterday’s rally. Today’s close is important. The more today closes near the high, the stronger the breakout on the daily chart. It would increase the chance of at least a small 2nd leg up after a a 2 – 3 day pullback.
The bulls will therefore buy pullbacks today. But today’s range is almost as big as yesterday’s. Today will probably not go much higher. They simply want today to close near its high.
The bears want today to close below the midpoint of the day’s range. That would be a sign that profit-taking is beginning. It would increase the chance of a pullback to the daily EMA and the June 10 high within a week or two. Consequently, the bears will sell reversals down from the high of the day.
Since today will probably not get much higher, yet the bulls want it to close near the high, the rally will probably evolve into a trading range within the next hour. After an hour or two of sideways trading, the bears would have a better chance of a reversal down to below the midpoint of today’s range. There is only a small chance of a big bear trend down to the low of the 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. 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
Yesterday was a trading range day with a late selloff. Today was a trading range day with a late rally. The bulls want the 4 month rally to close the February gap and continue up to a new all-time high.
But there is a 50% chance of a reversal down from a lower high. With no credible top, traders expect sideways to up over the next few days.
Remember the monthly chart. June had big tail on the top of its monthly candlestick. That increases the chance of a tail on the top of July. That would require a selloff of 50 points or so by the end of 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.
