Emini and Forex Trading Update:
Thursday August 8, 2019
I will update again at the end of the day.
Pre-Open market analysis
Yesterday reversed up from a test of Monday’s low. Because it had a bull body, it is a buy signal bar for today. It was also an outside up day. The bulls now have a micro double bottom, which is bullish.
However, the 4 day sell climax was surprisingly strong. Consequently, the bulls might need a week or more of stopping the selling before there will be a reversal up to a new high. Therefore, traders will look for reversals every few days until the bulls get either a very big bull bar (Surprise Bar) or 3 or more consecutive ordinary bull bars.
The bulls are hoping that yesterday will be similar to the December 26 reversal and lead to a Buy The Close rally on the daily chart. It will more likely be like the many reversals up in early 2018 and again in late 2018. They all became legs in a trading range.
The importance of this week’s open
The most important price for the rest of the week is 2885.00. That is the open of the week. If the week closes above open, there will be a bull reversal bar on the weekly chart. This week would then be a buy signal bar for next week. Traders will suspect that the correction is over.
But if this week has a bear body, it will be a weaker buy signal bar. There might be sellers above.
Since the selling has been exceptionally strong, even if the bulls get their buy signal bar, the 1st reversal up will probably be minor. The odds favor a trading range for at least a couple weeks.
Overnight Emini Globex trading
The Emini is up 11 points in the Globex session. Today might therefore gap up. But small gaps typically close within the 1st 2 hours.
Also, while yesterday was an outside up day, it had a prominent tail on top. That makes it a weaker buy signal bar on the daily chart. Additionally, as I wrote above, a relentless bull trend like the one after Christmas is less likely than a trading range after a sell climax like we had over the past week.
Finally, yesterday’s rally on the 5 minute chart was unsustainable and therefore climactic. It will begin to attract profit-takers. Traders should understand that there is only a 25% chance of another relentless bull trend again today. They should expect at least a couple hours of sideways to down trading that starts by the end of the 2nd hour today.
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 formed consecutive doji bars over the past 2 days. Today so far is a 3rd consecutive doji bar and a 2nd consecutive inside day. If today remains within yesterday’s range, there would be an ii Breakout Mode pattern. Traders would see today as both a buy and sell signal bar for tomorrow.
Minor legs up and down typically have a pullback within a week. Consequently, the odds are that the daily chart will test down for several days starting within a few days.
Less often, a leg will last a couple weeks before there is a pullback. In that case, the pullback will probably begin from around the July 11/July 19 double top. That is the start of the wedge bottom and it is a common target for a rally up from a wedge bottom. The daily chart should get there whether or not there is a pullback 1st.
While the daily chart is still in a bear channel, it is a weak trend and more of a trading range. There is no sign that the pattern of 2 – 3 week legs up or down is about to end.
Overnight EURUSD Forex trading
The EURUSD 5 minute chart has had a small range so far today. It reversed down from just below yesterday’s high and it is now testing yesterday’s low. Since it has been in a tight range for 3 days, traders expect a breakout either today or tomorrow.
The 1st breakout of a Breakout Mode pattern fails 50% of the time. Furthermore, once there is a successful breakout, there is a 50% chance of it being up or down.
Since the selloff of the past 5 hours has been in a tight bear channel, day traders are only selling. The bulls are not yet buying. They want to see the chart to begin to go sideways first. That would be a sign that the bears are becoming less eager to sell.
The selloff is now just above yesterday’s low. This is a price level where the bulls got reversals up twice in the past 2 days. Traders therefore doubt that the overnight bear trend will last much longer. They expect an evolution into a trading range within the next couple hours. Day traders will then scalp up and down.
A strong reversal up or a strong bear breakout are currently much less likely. If either happens, day traders will look for a swing trade.
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
After failing to close the gap above yesterday’s high, the Emini rallied in an extremely strong Small Pullback Bull Trend today. After going sideways for a couple hours, the bulls got a little trend resumption up into the close. Today formed a good entry bar on the daily chart after yesterday’s micro double bottom.
Since today was extremely strong, the rally is unsustainable. It is a buy climax and bulls will begin to take some profits. Traders should expect at least a couple hours of sideways to down trading tomorrow that begins by the end of the 2nd hour.
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.
