Emini and Forex Trading Update:
Wednesday August 26, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini gapped up Monday on the weekly chart and rallied. Yesterday was in a trading range for the 1st 3 hours and then in a Small Pullback Bull Trend. It was follow-through buying after Monday’s gap up on the weekly chart.
The monthly candlestick closes on Monday. There is often some profit taking just before any strong trend bar closes. Consequently, there is an increased chance of a 1 – 2 day pullback within the next few days.
But traders expect higher prices because the daily chart is in a Small Pullback Bull Trend. Traders will be eager to buy the 1st 1 – 2 day pullback.
If there is a gap down soon, it will create an island top with Monday’s gap up. However, an island top is a minor reversal pattern, especially in a strong bull trend.
Overnight Emini Globex trading
The Emini is unchanged in the Globex session. Since yesterday was a buy climax, traders expect at least a couple hours of sideways to down trading to begin by the end of the 2nd hour. But there is a 50% chance of some Emini follow-through buying in the 1st 2 hours.
Can today be another strong bull day? Of course, especially since the daily chart is in a Small Pullback Bull Trend. Traders will continue to buy one day pullbacks and intraday selloffs. However, most recent days have had a lot of sideways trading. Day traders will expect more again today.
It is important to note that while the bull trend on the daily is very strong, it is also extreme. And, remember, there was a streak of 9 consecutive bull days that ended 2 weeks ago. That increases the chance of a surprisingly big, brief profit-taking selloff coming within the next couple weeks.
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 in a trading range for a month. This is a Breakout Mode pattern. The past 4 days have been sideways in the middle of the range. Yesterday was then 2nd of 2 inside bars, so there is an ii Breakout Mode pattern within the trading range. The ii followed an outside bar so the past 4 days formed an ioii Breakout Mode pattern.
Today fell 12 pips below yesterday’s low. That triggered a sell signal. But the breakout so far is small and a breakout of a Breakout Mode pattern has a 50% chance of failing.
The open of the month is the key
The dominant feature for the EURUSD Forex market is the big July breakout on the monthly chart. August is the follow-through bar. If August has a bull body, traders will expect higher prices over the coming months, even if there is a 1 – 2 month stall or pullback first. But if August has a bear body, traders will wonder is July was simply a strong, brief leg up in a 2-year trading range.
Consequently, the EURUSD is hesitating around the open of the month. It might stay here and then decide on Monday whether to close slightly above or below the open of the month.
If August has a small bull or bear body, which is likely, September will probably not be a strong trend bar up or down. Traders will expect instead that the EURUSD will work down to the June 10 high, which is the breakout point on the daily chart. The wedge buy climax on the weekly chart (not shown) will probably lead to at least a few weeks of sideways to down trading.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market old off overnight to below yesterday’s low. This triggered the ioii sell signal on the daily chart. The selloff dipped 3 pips below the open of the month, which might be a magnet for the remainder of the month. That means the EURUSD might go sideways here for the remaining 4 trading days in August.
The selloff of the past hour was extreme and there is a possible micro double bottom. Since the selloff was probably just a sell vacuum test of the open of the month, there is an increased chance that the EURUSD will enter a trading range for several days.
The bears want the selloff to continue down to the low of the month, creating a strong sell signal bar on the monthly chart. But after 4 sideways weeks and the EURUSD now back to where August began, a trading range is most likely.
Day traders will sell rallies. If there is a 20 – 30 pip bounce, they will also buy reversals up from around the low. The result will probably be a trading range.
The bulls want a sharp reversal up from monthly support and the bears want the plunge to continue down to the low of the month. But the micro double bottom exactly at the open of the month makes a trading range most 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
The Emini stayed above the EMA for 85 bars over 2 days. This is one of the longest streaks in several years. While climactic, it is also a sign of relentless, eager bulls.
The Emini continued yesterday’s strong Small Pullback Bull Trend. There was profit taking late in the day, but the bulls bought into the close and the day closed on the high.
This is the strongest consecutive bull days in a long time. While unsustainable and therefore climactic, there is no credible sign of a top on the daily chart. Traders will buy the 1st 1 – 2 day pullback.
Can tomorrow be a 3rd consecutive strong bull day? Probably not. After 2 extremely strong bull days, the bulls will probably begin to take profits on rallies. Also, the bears will look to sell reversals down from the high. This increases the chance of trading range trading tomorrow.
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.
Fed Chair speaks tomorrow. BubbleVision is advertising this as a “profoundly consequential speech, changing how the Fed views inflation.”
Would like to understand if you asses any market reaction from tomorrow’s meeting equivalent to the FOMC meetings and the trading heads up you provide on the FOMC meetings. Would it be better to avoid certain trading times tomorrow? Or not necessary / do not assess significant market reaction?
Appreciate as always, trying to keep us out of trouble.
The problem with his talk is that the market could move violently at any point. I am not going to worry about it and instead trade as I normally do.
With the buy climax as extreme as it is, there is the potential for a big move down. However, whenever the odds go up for something, they also go up for the exact opposite.
Tomorrow could be interesting, especially since the monthly candlestick often changes dramatically just before it closes.
The close today looks like a decent candidate for a possible HL MTR.
Oops, make that a HH MTR.
Yes. The 60 minute chart formed a big bar late in its bull trend today. There was a brief 2nd leg up into the close. There is therefore a 60% chance that the rally will end by the 2nd hour tomorrow and the 60 minute chart will then be sideways to down for about 10 bars. That is about a day and a half.