Emini and Forex Trading Update:
Tuesday July 2, 2019
I will update again at the end of the day.
Pre-Open market analysis
Yesterday had a big gap up to a new all-time high, but sold off for 5 hours. There was a gap up on the weekly and monthly charts as well, but both closed during the 5 hour Small Pullback Bear Trend.
The Emini rallied from just above Friday’s high and the day closed just below last month’s high. That undid most of the damage from the 5 hour selloff.
The gap up on the 5 minute chart yesterday was so far above the EMA on the 5 minute chart that many traders did not want to buy that far above the average price. Many prefer to buy a wedge pullback to around the EMA, and they want it to be a 50% pullback. It took 5 hours for them to get their setup. They bought strongly into the close yesterday.
No good sell signals yet
While yesterday had a bear body, there was a big tail below. In addition, the momentum up on the higher time frames is strong. Consequently, this is a weak sell setup on the daily chart. This is true despite the a small wedge buy climax on the daily chart. Traders expect only a minor reversal and not a bear trend. The Emini often goes sideways for a few days after a big gap up or down.
On the weekly and monthly charts, a reversal down would create a sell signal for an expanding triangle top. But, the rally will probably continue up to the top of the expanding triangle before reversing. That line is currently around 3040. As a result, any reversal down this week will probably be minor.
Overnight Emini Globex trading
The Emini is down 1 point in the Globex session. Yesterday’s selloff retraced 50% of the rally that began on Friday. The late rally then retraced 50% of the 5 hour selloff. Big Up, Big Down, Big Up creates Big Confusion. Confusion is a hallmark of a trading range. Consequently, there is an increased chance of a trading range day today.
Furthermore, yesterday’s range was big and today will open in the middle 3rd of that range. Today will therefore overlap much of yesterday’s range. Traders will look to buy near yesterday’s low and sell near yesterday’s high. As a result, there is an increased chance of today being an inside day and mostly a trading range day.
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. Buyers of the Brooks Trading Course have access to a much more detailed explanation of the swing trades for each day.
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.
EURUSD Forex market trading strategies
The EURUSD daily Forex chart sold off strongly yesterday and retraced about half of last week’s rally. The bulls want another higher low and the a break above the March 20 major lower high. This is still slightly more likely than a resumption of the yearlong bear trend. The bulls need to get a reversal up within a week to continue their 2 month trend.
Trading range always has both bull and bear trend
It is important to notice that the chart has been in a trading range for 5 months. Every trading range is also in a bull trend and a bear trend. There is always both a reasonable buy and sell setup.
The market is in breakout mode. That means that there is constantly about a 50% chance of either an eventual bull or bear breakout.
Right now, the daily chart has been forming higher lows and highs for 2 months. Consequently, the odds continue to slightly favor higher prices. However, a break below the May low will make traders conclude that the bull trend has ended and the bear trend has resumed.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart reversed up 40 pips overnight after yesterday’s strong selloff. Traders are deciding whether yesterday was the resumption of the bear trend on the daily chart or just a test of the 20 day EMA and a 50% pullback from last week’s rally.
If the bears get a 2nd strong bear day today, the odds will favor a test of the June low and maybe the May 52 week low. It is currently more likely that yesterday was a sell vacuum test of support.
Traders will find out over the next week days. If the bulls can stop the selling and begin to form a base, the rally will resume. If the bears can get follow-through selling over the next few days, the selloff will test the June 18 higher low of 1.1181.
Since the selloff is now at support and there was no follow-through selling overnight, the 5 minute chart will probably form a trading range for at least a couple days. Both the bull and bear day traders will look for 10 – 20 pip scalps today. A strong trend up or down is less 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. Buyers of the Brooks Trading Course have access to a much more detailed explanation of the swing trades for each day.
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.
End of day summary
Today was an inside day and a trading range day until the rally into the close. Because today is an inside day closing on its high, it is a buy signal bar for tomorrow.
Tomorrow has an early close and Friday will probably be a low volume day because of the Thursday holiday. Consequently, there might not be much movement until 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 Intraday Market Update page.
I’m a long term subscriber to the room. Thanks for sharing all the wisdom and trading strategies. Can I ask your analysis of the bitcoin chart? I’ve been trading that recently. Most trading range price action recently on the lower time frames.
Al,
There are two cases in the 5m Day session chart: the bear case and the bull case.
bear case: tight bear trend (leg 1 down), then pullback yesterday, but 1st reversal is minor,leg2 equate to Leg 1 (bar2 – bar 58 is leg1 yesterday), leg 2 starts from bar 13 today, I thought the leg2 divided 2 small bear legs because bar 36/37 is bear BO, then bar 37-44 is pullback, there is still one more bear leg to go after bar 44, so I hold short and wait for the 2nd bear leg.
bull case, HL MTR till bar 38 today from yesterday, 2 bull legs up, when bar 38 – 45 forming in 5m day session chart, it’s possible to start leg 1 up.
Between the bear case and the bull case both are valid, how do I tell which one has a bigger probability of occurring? What is your thought process when determining this?
Hi Frank,
As you duplicated this query in the Brooks Price Action site, here is Al’s reply from there for reference:
Al: I always constantly think of all 3 variables, prob, risk and reward, and I assume each changes with every tick. The more momentum, the higher the prob. The stronger a reversal, the higher the prob. When it is going down, like 26, more down is likely until there is a credible bottom, like 40. Then it is 50-50 until the bulls take control, like 46-47.