Emini and Forex Trading Update:
Tuesday July 23, 2019
I will update again at the end of the day.
Pre-Open market analysis
There are still sell signals on the daily and weekly charts. Yesterday did not trigger either. Yesterday was an inside day and the week so far is an inside week. However, last week’s 2 Bear Surprise Bars and the 4 week wedge top still make lower prices likely for 2 – 3 weeks.
The daily chart has a wedge buy climax. Targets for the bears are the higher lows around 2950 and 2900. A 2 – 3 week pullback is more likely than a major trend reversal down.
Since yesterday was a bull inside day after a micro double bottom, it is a buy signal bar for today. The bulls need a strong break above Friday’s high to convince traders that the 6 day pullback has ended. Consequently, even though today could trigger the buy signal, the odds are against a resumption of the bull trend without a deeper pullback first.
After 7 weeks without a pullback, the weekly chart will pull back soon. Since last week closed near its low, this week will probably trade below last week’s low. However, traders expect that the bulls will buy not far below.
This week so far is a bull inside bar on the weekly chart. It could therefore be a buy signal bar for next week. But even if it is, the odds still favor a pullback after an 8 week bull micro channel and last week’s big bear bar on the weekly chart.
3 week trading range so Breakout Mode
The Emini has been in a trading range for 3 weeks. While there have been big moves up and down, there has been no follow-through. This is a Breakout Mode pattern.
Traders are waiting for next week’s FOMC announcement. Do not assume that an interest rate cut will result in a rally. When a chart is in breakout mode, it is better to be completely neutral and trade what you see, not what you think should happen. It is impossible to know in advance if most dollars will buy or sell the news.
Overnight Emini Globex trading
The Emini is up 11 points in the Globex session. It will therefore likely gap above yesterday’s high. That would trigger a minor buy signal on the daily chart.
Yesterday was a buy signal bar but it had a tail on top. Also, there were 2 big bear bars last week and a reversal down from a wedge top on the daily chart. Consequently, the odds are that there will be more sellers than buyers above yesterday’s high. Traders need to see a strong break above Friday’s high before concluding that the bull trend is resuming. They believe that a rally from here might last a few days, but it will probably end below last week’s high.
The 3 week range is big enough for a bull trend day today. However, since the Emini is probably heading down to 2900 – 2950, if there is a surprise, down is slightly more likely than up.
EURUSD Forex market trading strategies
The EURUSD daily Forex chart broke below the neck line of the month-long head and shoulders top. There is now a 40% chance of about a 200 pip measured move down.
That means there is a 60% chance that there will be a reversal up from here or from just below the May low. A reversal up from below the May low would create an expanding triangle bottom with the April low and slightly lower May low. That is a major reversal pattern. Like all major reversal patterns, if there is a good buy signal bar, it would have a 40% chance of a major move up.
Whenever there is a breakout, the chance of success is greater if there are consecutive strong trend bars on the breakout. Consequently, the bears want today to close on its low and tomorrow to be another big bear bar closing on its low.
Odds are against a big breakout below May low
If the bears get their consecutive big bear bars closing near their lows, the odds will favor a break below the May low. That would be a resumption of the yearlong bear trend.
It is important to note that there have been many new lows in the bear channel. Each one reversed up for at least a couple weeks. Traders therefore believe that a break below the May low would soon reverse up. For example, next week’s FOMC announcement could be a catalyst for a big move up or down. A move up would be a failed bear breakout.
A black swan is any low probability event. They are real. While the odds favor a reversal up, if there is none, traders should be aware that this time could be different. While unlikely, the selloff could continue down for a 700 pip measured move based on the height of the channel down from the September high.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart sold off 40 pips overnight in a tight bear channel. It broke below the neck line of the month-long head and shoulders top on the daily chart. The overnight rallies have not yet been big enough for the bulls to scalp. However, if the selling dries up and the chart begins to go sideways for a couple hours, the bulls will begin to buy for scalps.
Until then, the bears will sell 10 – 20 pip bounces. The want the day to close near its low. They then want tomorrow to be a 2nd consecutive bear trend day. That would increase the chance of a successful bear breakout on the daily chart. They then would probably get a break below the May 52 week low next week.
Today’s close is important. If the bears can get the day to close near its low, they will increase their chance of lower prices tomorrow. But if the bulls can get today to close 20 or more pips above the low, they will make traders doubt the breakout. The chance of a failed breakout will be higher if today closes back above the July 9 low of 1.1193.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
The Emini triggered a weak buy signal on the daily chart today by going above yesterday’s high. After a 3 hour trading range, the bulls got a breakout. Today was a Bull Trending Trading Range Day.
While the 3 week trading range is a Breakout Mode pattern, the math is slightly better for the bears near-term. After the big bear days last week and the parabolic wedge top, the odds favor a test down to 2900 – 2950 within the next 2 – 3 weeks.
See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.
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.
Today has similar PA as yesterday. Early morning wedge bottom reversal up.
Why yesterday’s 12pm (PST) big bull BO is a bull trap, while today’s big bull BO at 10:40am (PST) you think is a measuring gap and expect 2nd leg up?
Thank you very much.
I talked about this today in the chat room. Yesterday was a test of the 60 min EMA and the follow-through bar was a big bear bar closing near its low. That breakout was likely to fail.
Today’s bull breakout bar was bigger and the bear bar was smaller. Also, there was no strong resistance. The odds favored at least a small 2nd leg up. Finally, I said that a bull trending trading range day was likely, and that is what followed.
Thanks a lot,Al.