Emini follow-through buying but July still might close below open.

Trading Update: Thursday July 22, 2021

Emini pre-open market analysis

Emini daily chart

• Yesterday saw Emini follow-through buying after Monday’s big bull reversal.
• Since yesterday had a bull body, it confirmed the reversal. That increases the chance of at least a small 2^nd leg sideways to up after the 1^st pullback.
• There is now a 50% chance of a new high. That means that there is still a 50% chance of a lower high.
• A lower high would lead either to a bear trend or a trading range. A trading range is always at least slightly more likely.
• What happens if there is a new high next week? The bulls want the bull trend to continue forever. That is not going to happen.
• The next reasonable targets are the measured move up from the 3-month trading range at 4,404, the top of the bull channel at around 4,500, and the measured move up based on the height of the pandemic crash at 4,537.
• The Emini has been sideways in July. Trading ranges resist breaking out. Therefore, there might be more sellers than buyers at the new high, which would be a break above the trading range.
• I have been saying that July will probably have a bear body on the monthly chart when July closes next Friday. It could make a new high and then sell off to below the open of the month before the month ends next Friday.
• The more the reversal up continues, the more likely the bulls will get a 6^th consecutive bull bar on the monthly chart. That has not happened in 10 years. Therefore, a 7^th consecutive bull bar will be even more unlikely, which means August would then probably have a bear body.
• While it is less likely after the 2-day rally, the bears still have better than a 50% chance of creating a bear body in July. The Emini is not too far above the open at the moment. Also, next Wednesday’s FOMC announcement is a catalyst. It could lead to a big move up or down, and that means there is the potential for a move down below the open.

Emini 5-minute chart and what to expect today

• Emini is unchanged in the overnight Globex session.
• Monday was a strong bull trend. Trends tend to weaken as they progress. Yesterday was also a bull trend, but it was in a bull channel, which is a weaker trend.
• A bull channel usually behaves like a bear flag in that a breakout is more likely to be below the channel than above.
• That increases the chance of a swing down today, which would break below yesterday’s bull trend line.
• A bull channel typically evolves into a trading range. The market usually has to go sideways at least 10 – 20 bars before the bears can get a trend reversal.
• Even if there is a trading range today, the odds are still greater that the 2-day bull trend will resume for at least one more leg sideways to up than it is that it will reverse.
• So what should traders expect for today? While a trend up or down can always happen, the loss of momentum yesterday increases the chance of at least a couple hours of trading range trading today. Also, today will probably be sideways or down after 2 big bull days in a month-long trading range.

Yesterday’s Emini 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. Buyers of both 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. These therefore are swing entries.

It is important to understand that most swing setups do not lead to swing trades. As soon as traders are disappointed, many exit. Those who exit prefer to get out with a small profit (scalp), but often have to exit with a small loss.

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

EURUSD Forex daily chart

• Consecutive wedge bottoms since June 18. That increases the odds of a break above the month-long bear trend line and then a rally up to the July 9 lower high. The rally could reach the June 25 high over the next few weeks.
• Today triggered buy signal, but so far is a small bear day. It has been a trading range day on the 5-minute chart.
• A buy signal in a tight bear channel is low probability. Many bulls will wait to buy until they see a couple big bull bars or a breakout above the EMA.
• Until then, odds favor at least slightly lower prices.
• Sideways for 4 days, which increases the chance of more sideways, possibly until Wednesday’s FOMC.
• If today closes near its low, it will be a Low 1 sell signal bar for tomorrow. But after 4 sideways days and consecutive wedges, it would be a weak signal, just like yesterday was a weak buy signal. That means sideways is more likely than up or down.
• The bears want the month-long tight bear channel to continue to below the March low, which is also a measured move target. Because of the wedge bottom, they would like a collapse below the bottom of the bear channel to below that March low.

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

End of day summary

• Trading range day for the 1^st half of the day.
• Strong rally at midday from a higher low double bottom with yesterday’s strong rally.
• Closed on the high so possible gap up tomorrow.
• Only 20 points below all-time high so might make new high tomorrow.
• If so, then this week will be outside up week. That would increase chance of higher prices next week.
• Tomorrow is Friday so weekly support and resistance can be important, especially in the final hour.
• The open of the week is probably too far below to be a magnet.
• Last week’s high is the all-time high and that is an important magnet.
• The more the week closes near its high and above last week’s high, the more likely next week will trade higher.

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

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.

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Charts use Pacific Time

When I mention time, it is USA Pacific Time. The Emini day session charts begin at 6:30 am PT and end at 1:15 pm PT which is 15 minutes after the NYSE closes. You can read background information on the market reports on the Market Update page.

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