Emini and Forex Trading Update:
Tuesday August 6, 2019
I will update again at the end of the day.
Pre-Open market analysis
Yesterday gapped down on the daily and weekly charts and sold off from the open. The gap might lead to a measured move down to near the June low.
However, yesterday is also at the support of the June 12 low. That was the 1st pullback in the June rally and is a common target for the bears. The market often begins to enter a trading range there.
In addition, the selloff is around a 50% pullback of the 2 month rally. Furthermore, it tested the 2800 Big Round Number and fell 100, which is also a Big Round Number. Finally, it reached a measured move down below the July 31 low. The bears will probably cover some of their shorts around here. This could lead to a 1 – 3 day rally.
But, the bears will probably sell the 1st rally and most bulls will only buy for a brief short-covering rally. Consequently, they, too, will probably look to sell after a 1 – 3 day bounce.
Overnight Emini Globex trading
The Emini sold off to below 2800 overnight and then reversed up 90 points. This means that the bears are starting to take profits. A profit-taking rally was likely to begin either today or tomorrow after 4 huge bear trend days down to a support zone.
Because the selloff was so extreme, traders do not see much downside risk today. But the bears will probably sell the first 1 – 3 day rally. Strong reversals in strong bear trends create confusion. The result is usually more trading range trading.
Since the daily ranges have been huge, the legs in a trading range initially might be more than 50 points. Also, the bars on the 5 minute chart will probably continue to be big. Therefore, day traders will have swing trades up and down, despite what will likely be the start of a trading range for a few days.
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 and Encyclopedia of Chart Patterns 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 rallied 200 pips over the past 4 days after a failed breakout below the 5 month trading range. There was both a month-long wedge bottom and a 4 month expanding triangle bottom. The momentum up is strong enough for traders to expect at least a small 2nd leg up over the next 2 weeks.
However, today so far is a big bear reversal day at the top of the 7 week bear channel and at the EMA. The bears want another lower high and then a new low. This rally would then be just another strong bull leg in the yearlong bear channel.
But this rally is strong enough so that the bears will probably need a micro double top. Traders will buy the 1st 1 – 5 day selloff.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart rallied 50 pips overnight and then sold off 70 pips. It spend most of the past 6 hours in a trading range around the open of the day. Traders therefore believe that the open is a fair price. Consequently, they think that the 20 pip bear breakout over the past hour might fail.
If today gets drawn back up into that trading range, today would then be a doji bar on the daily chart. That would be more neutral than a big bear reversal bar closing on its low.
Day traders know that today’s close is important. If today closes near its low, today will be a strong bear reversal bar on the daily chart. It would increases the chance of a deep reversal this week.
The bears do not need it to sell off from here. If today closes where it is now, today will be a strong bear bar. Having the day close much lower will not make the bar significantly more bearish. Consequently, there is not much incentive for the bears to sell at the low. They will be satisfied to sell 20 – 30 pip rallies and try to get the day to close near its low.
The bulls know that they probably cannot get today to close back near its high. Their goal is simply to weaken the overnight bear trend. All they need to do is have the day to close near the open. They therefore will buy selloffs and take profits around the open.
Consequently, despite a big bull trend and then a big bear trend overnight, the remainder of the day will probably be a trading range. Traders will be fighting over the location of the close.
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 and Encyclopedia of Chart Patterns 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
The Emini sold off for a couple hours after a big gap up. It then rallied from a wedge bottom to a new high of the day. On the daily chart, today is an inside bar and a buy signal bar for tomorrow. If tomorrow gaps up, there will be a 2 day island bottom.
But it is important to understand that island tops and bottoms are minor patterns. After such a strong selloff, this short covering rally will probably lead to a minor reversal up for another day or two. Following the collapse and strong reversal up, the Emini will likely begin to form a trading range for several days.
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.
