Trading Update: Wednesday July 14, 2021
Emini pre-open market analysis
Emini daily chart
- Another day, another new high, and Emini measured move 4,404 closer. Strong rally since since June 18, but yesterday reversed down from a new high.
- Yesterday is a sell signal bar for a failed new high, but after 3 bull bars closing near their highs in a strong bull trend, the reversal down will probably be minor.
- I said last week when the 11-day bull micro channel (which is a buy climax) ended that the Emini might make a couple more new highs over the coming weeks, but that it will probably be mostly sideways. That would be similar to what followed the April buy climax. Yesterday could be the start of a 1- to 3-day leg down.
- The bulls want at least one more new high and for the rally to reach the top of the channel, which is above 4,500.
- If there is a reversal down from a new high, there would be a micro wedge top with the July 7 and July 13 highs, and it would be around the 4,400 Big Round Number and the 4,404 measured move target.
- The bears would probably make another attempt at a correction.
- Remember, after 5 consecutive bull bars on the monthly chart, July will probably close below the open of the month.
- Also, after the climactic streak of 11 days in a micro channel, the Emini will probably not go a lot higher without a couple weeks of sideways to down trading first.
- Even though Emini is overbought, traders will buy even a 20% selloff.
- Only a single pullback day in a month so should have more pullback days within a few days, and maybe today.
- 15 – 20% selloff can begin at any time and before reaching resistance, but traders have been buying every 1- to 3-day reversal down, correctly expecting higher prices. No reason yet to believe that this is about to change.
Emini 5-minute chart and what to expect today
- Emini is up 15+ points in the overnight Globex session.
- Bears want today to trade below yesterday’s low to trigger minor sell signal on daily chart.
- Bulls want at least one more new high.
- Yesterday was a Spike and Channel Bear Trend. That typically evolves into a trading range.
- Bear channel is bull flag so should get at least a couple legs sideways to up today.
- Increased chance of trading range trading starting by end of 2nd hour today.
Yesterday’s Emini 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. Buyers of both 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. These therefore are swing entries.
It is important to understand that most swing setups do not lead to swing trades. As soon as traders are disappointed, many exit. Those who exit prefer to get out with a small profit (scalp), but often have to exit with a small loss.
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
EURUSD Forex daily chart
- Turned down from double top with July 6.
- Bears want measured move down from below April to May trading range. That is almost exactly at March 31 low.
- Should eventually reach March 31 low or November 4 low at around 1.16, but might test June 25 high first.
- Yesterday broke slightly below July 7 low.
- Today so far is reversing up.
- This is a lower low double bottom with the July 7 low, a failed breakout below that wedge bottom (50% of the time, a breakout below a wedge fails and the market reverses up), and a new wedge bottom where June 18 and July 7 are the 1st 2 lows.
- Lots of bars with tails since June 18. This is a sign of uncertainty.
- It increases chance that selloff from June 25 is just a bear leg in a trading range instead of a resumption of the bear trend.
- Because of all of the tails and reversals since June 18, the odds favor a reversal up for a couple weeks starting soon. It might be starting today.
- November low is bottom of yearlong trading range and a bounce for several weeks is more likely than a successful breakout. The bounce can come at any time, even from below the November low.
- Less likely, selloff will break strongly below yearlong range and fall for measured move down to the March 2020 low at 1.06.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
- Today reversed down from a new all-time high on the open from above yesterday’s high to below yesterday’s low. Today was an outside down bar.
- The Emini closed in the middle and it is therefore a weak sell signal bar for a small wedge where the 1st 2 highs came on July 7 and July 13.
- Magnets above are the 4,000 Big Round Number and the 4,404 measured move based on the April to June trading range.
- The 11-day bull micro channel that ended last week was a buy climax, and it will probably limit the upside over the next couple weeks.
- July should have a bear body so there should be a reversal down to below the open of the month before the end of the month.
- Traders will continue to buy every 1- to 3-day pullback, betting on new highs, until there is a strong reversal down.
- There should be a 15-20% correction this year, but bulls will buy it.
- After consecutive bear days in a buy climax, there is a slightly increased chance of a bear day again tomorrow.
- After 3 sideways days, there is an increased chance that tomorrow will be mostly sideways as well.
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 Time
When I mention time, it is USA Pacific Time. The Emini day session opens at 6:30 am PT, and closes at 1:15 pm PT, which is 15 minutes after the NYSE closes. You can read background information on the market reports on the Market Update page.
Hi Al,
Sorry for the follow up question. How reliable is the
reversal setup that started at 9:00 am with the surprise large bull bar. The reversal did not have a good signal bar, it followed 8 bar bear micro channel and it was below the MA.
I am always afraid to enter on those kind of reversals but they
seem to happen relatively often.
If you were in the chat room, I said that the bar was enough to make the market Always In Long, even without the follow-through bar, and that it was probably the low of the day.
Hi Al,
If a swing trader is short the EURUSD, where would his swing stop be?
Above the 6/25 lower high is the obvious choice, but I have hard time deciding whether the 6/25 lower high is a major high. We did not have a strong move down since the 6/25 high and I see it more as a minor high that the market can trade up to and setup a DTBF and reverse down.
Is that an objective read of the chart or I am missing something?
Is being uncertain whether a lower high is major or minor a sign that the market is in a trading range phase?
There are many variables. By swing trader, I assume a trader is looking for 10 – 20 bars and at least 2 legs from his entry price.
If a swing trader is comfortable with wide stops, the obvious stop is somewhere above the June 25 high. Since the EURUSD has probably been in a trading range since June 18, it will probably break above that high this summer.
I personally would get out above a strong bull bar like today. In fact, it is reasonable to get long. This is because there is a failed breakout below the wedge bottom and the market is at the bottom of a yearlong trading range. A trader can always short again either below a bear bar closing below its midpoint or below today’s low.