Emini and Forex Trading Update:
Wednesday June 24, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini triggered High 1 bull flag buy signals on both the daily and weekly charts yesterday. However, it reversed down from a wedge top after poking above last week’s high. It closed near the low of the day. Yesterday is therefore a sell signal bar for today. There is a small triple top and a lower high major trend reversal going into the end of the 2nd quarter.
The bears want this to be the start of a selloff. However, the bulls hope that yesterday is just a pullback from above last week’s high.
Traders are deciding if the Emini will reach the gap on the weekly chart above the February 24 high before correcting. Traders expect a 15% correction at some point this summer. It might have begun with yesterday’s failed breakout above last week’s high.
There is a strong bull trend on the daily and weekly charts. Also, the gap above the February 24 high is a strong magnet. Traders also know that there is a seasonal bullish bias going into the 4th of July. However, the institutions have made huge profits in the 2nd quarter. Many may take profits before the quarter ends. Traders do not yet know which of these factors will lead to the a successful breakout.
Spending time thinking about things like this is a distraction for traders. It is better to just watch the charts and trade what you see.
Breakout Mode
The Emini is still in a 6 day tight trading range. It is therefore in Breakout Mode. Traders believe that the probability of a bull breakout is the same as for a bear breakout.
There should be a breakout of the 6 day trading range before the end of the month next week. Traders are ready for a breakout in either direction. Furthermore, they know that the 1st breakout fails 50% of the time.
The daily and weekly charts are in bull trends. But most institutions have huge profits this quarter. If many take profits going into the end of the quarter, that profit taking could be the start of a 15% correction over the next month or two.
Overnight Emini Globex trading
The Emini is down 20 points in the Globex session. It will therefore probably gap down today. Since yesterday gapped up, yesterday would then be a 1 day island top.
However, the most important chart pattern at the moment on the daily chart is the 7 day tight trading range. Traders have been selling near the top, buying near the bottom, and expect every day to reverse the prior day.
Today will open in the middle of the range. That location increases the chance of a more neutral day. That means traders expect trading range price action today.
Because the daily ranges have been big, there will probably be at least one swing up and one swing down. However, traders will expect any trend lasting 2 – 3 hours to either go sideways or reverse.
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. There is always both a reasonable buy and sell signal. The bulls see today as a pullback from a rally from a double bottom bull flag.
However, today so far has a bear body and there is now a double top with the June 16 lower high. The bears hope a bear trend began on June 10. They therefore see yesterday as forming a double top bear flag.
The chart is in Breakout Mode. That means the bulls and bears are balanced. Traders believe that the probability for a breakout up or down is about 50%. Otherwise, the EURUSD would not be going sideways like this.
There are always going to be things that change the probability a little in favor or the bulls or bears for a day or so. However, traders know that the market it neutral. They tend to sell near the top of the 4 week range, buy near the bottom, and take quick profits.
The breakout can come at any time. But traders know that the 1st breakout up or down will fail and reverse 50% of the time.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market overnight was in a trading range that had a downside breakout. It has been in a lower range for several hours. This is a Trending Trading Range Day, which is a weak bear trend.
The EURUSD has been in a trading range all day except during the brief bear breakout. Therefore traders have been trading it like a trading range. They are looking to buy reversals up from the bottom, sell reversals down from the top, and scalp for 10 – 20 pips. Unless there is a breakout up or down, they will continue to scalp all day.
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
By gapping down, the Emini triggered the lower high major trend reversal sell signal. It then crashed to below the low of the 7 day tight trading range. After a parabolic wedge sell climax, it rallied back above the EMA, but then entered a trading range. Also, it closed below the 7 day tight trading range.
It dipped back below 3034.80, which is 10% down from the all-time high. As long as it is below that price, it is back in correction territory. It also briefly fell below the open of the week.
If tomorrow is a bear day, that would confirm today’s bear breakout. A confirmed breakout has a higher probability of a swing down.
But if tomorrow is a bull day that closes near its high, traders will suspect that today’s breakout will have failed.
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.
Al, do you think this may just be:
1) a 2 legged pullback, this being the second leg underway, to a measured move to close the gap on 16 may, and then
2) price rally for the 4th of July for another 1-2 weeks.. before deciding if it wants to drop or make new highs?
or do you think this could possibly be a larger pullback.. because, if traders start taking profits, they would not be buying again so soon.. what do you think is more likely?
I talked about this in Thursday’s report, which I just completed. Today should tell us.
Alright, thanks Al..