Emini and Forex Trading Update:
Wednesday August 5, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini gapped up on the daily, weekly, and monthly charts on Monday. Traders expect at least slightly higher prices. With yesterday closing on its high and with the top of the February gap just 6 points above yesterday’s high, the Emini might gap above that target today.
Even if it does not, traders expect the gap to close this week. Furthermore, the Emini will probably make a new high within a couple weeks. There is only a 40% chance of more than a 3 day pullback before there is a new high.
Can today sell off and close the gap above Friday’s high? The bears have a 20% chance at the moment. More likely, there will be buyers below yesterday’s low and the bulls will try to close the gap above the February 24 high. Therefore the risk of a big bear day is small. Day traders expect either another sideways day or a bull trend day today.
Overnight Emini Globex trading
The Emini is up 18 points in the Globex session. If it opens here, there will be a gap up. More importantly, it will have closed the big February gap down on the daily and weekly charts. That would make a new high likely within a week or two.
Yesterday ended with a very strong rally. A protracted rally in a tight bull channel is a buy climax. It tends to attract profit takers. When a day ends with a buy climax, there is a 50% chance of some follow-through buying on the open of the next day. However, there is a 75% chance of at least a couple hours of sideways to down trading that starts by the end of the 2nd hour.
Because the bulls will probably achieve their goal of closing the gap on the weekly chart, some will take profits. This is especially true because the Emini is just below the resistance of the all-time high from February. If enough do, today could then trade down from above yesterday’s high to below its low. The bears have a 20% chance of an outside down day today.
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 rallied for 2 days from a High 1 bull flag buy signal bar. However, there was a strong sell signal bar last week and there is an extreme buy climax. Also, this is taking place at the resistance of the September 2018 high. Therefore, despite the strong bull trend, many bulls will take some profits soon.
If enough do, the EURUSD will pull back for a couple weeks to around the EMA and the March 9 high. While yesterday and today so far are good for the bulls, traders should expect that either the pullback began last week or it will begin after a brief new high, like on June 10.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market rallied overnight and it is testing last week’s high. However, the rally has had 3 legs up in an bull channel. It is therefore a wedge, which is a type of buy climax.
Buy climaxes usually attract profit takers. While the bulls want the rally to continue to above last week’s high today, the wedge bull channel will probably evolve into a trading range within a couple hours.
So far, day traders have mostly only been buying for 20 pip scalps and a swing up. However, they will begin to sell reversals down from the intraday high for 10 – 20 pip scalps.
Can today continue up all day? Probably not because the range is already about average and last week’s high is resistance. Therefore either sideways trading or even a reversal down is more likely.
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
Today was a small day in the resistance zone around the old high and it closed in the middle of the range. The lack of energy after the gap up above resistance increases the chance of a 1 – 2 day pullback into the February gap this week. Additionally, it increases the chance of another quiet day tomorrow.
But a small day also increases the chance of either a gap down, creating a 1 day island top, or an outside up or down day. However, unless there is a very strong reversal down, the bulls will keep buying pullbacks, like they have been doing for 5 months.
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.
