Emini and Forex Trading Update:
Monday July 27, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini formed a 3rd doji bar on the weekly chart last week. That is a sign of a loss of momentum in the rally. Because it had a bear body, it is a sell signal bar for this week. But a doji is a weak sell signal bar
Friday was a bear day on the daily chart. It was the entry bar for the bears. who sold below Thursday’s low. Thursday was an outside down bar after a test into the February gap and therefore a sell signal bar.
Can the Emini still rally and close the February gap this week? There is still a 50% chance of a new high before there is a pullback to the middle of the 3 year range. However, the bulls need July to close at or above the June high and not at the low of the month. Traders will have a better idea by the end of the week, which is the end of the month.
Final week of the month
On the monthly chart, June had a big tail on top. I have been saying that there would probably be sellers above the June high. With July trading above June late in the month, I said there was an increased chance of a selloff at the end of July. That is still true.
This is the final week of the month and there is an increased probability of a reversal down. It might have started on Thursday. If there is a reversal down this week, it will probably lead to a selloff that will retrace about a third to a half of the 4 month rally. The swing down will probably last several weeks, but it could continue for a couple months.
Overnight Emini Globex trading
The Emini is up 13 points in the Globex session. The bears want today to trade below last week’s low. That would trigger a weekly sell signal. The bulls, however, see Friday as a higher low major trend reversal on the 5 minute chart. They therefore want a strong rally and a resumption of the daily bull trend.
As I said, the next couple weeks are very important. The Emini is testing the all-time high after an extreme buy climax. There is therefore an increased chance of a big breakout or big reversal. That increases the chance of big trend days up or down.
However, the Emini often goes sideways while traders wait for the breakout to begin. Friday was an example. There is increased tension. Traders are ready for a big move. But they want to see consecutive big bars up or down. Until they see that, they will continue to look for reversals every 1 – 3 hours.
Friday’s setups
Here are several reasonable stop entry setups from Friday. 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 is accelerating up to the September 2018 high. It does not matter if the rally will break above it on the current leg up. The rally is strong enough so that it should continue at least a little higher. It is likely to get above that high. However, because it is so extreme, there probably will be an abrupt pullback starting this week
Nested wedge buy climax
The rally has had 3 legs up from the March low. It is therefore a wedge buy climax. The overnight rally is an acceleration up from Thursday. Thursday was a pause after a 2 day strong rally.
When there are smaller days after bigger days in a buy climax, they are pauses between the legs. Today and Friday are forming the 3rd leg up in the past 7 days.
This is a parabolic wedge buy climax. Since it is within the bigger, 4 month wedge, there is now a nested wedge. It is also at a measured move up from the June wedge. This should attract profit taking this week. There is often a 1 or 2 day pullback and then a brief final leg up before the profit taking begins. But either way, the bulls will probably take some profits starting this week or next.
Once they do, there will probably be a 200 pip pullback lasting at least a week or two. However, the bears will need at least a couple weeks of sideways trading before they will have a reasonable chance at a trend reversal. Traders will be eager to buy a 200 pip pullback. There is now a bull trend on the daily, weekly, and monthly charts.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market is way overdone. The overnight range is very big and it is coming late in a bull trend on the daily chart. This is probably a blow-off top. However, traders will continue to buy until there is a reversal down.
There was a trading range around 1.1720 overnight. A trading range late in a bull trend is an area of agreement. The EURUSD is now above that area of agreement and it is very overbought. Traders will probably conclude that the price is too high. Therefore, traders expect a pullback to 1.1720 today or tomorrow.
Also, this is coming just below the resistance of the September 2018 high and there is a buy climax on the daily chart. Traders know that there will be profit taking on the daily chart starting this week or next.
Normally, traders would not be looking to sell in a strong bull trend because the odds favor higher prices. A nested parabolic wedge buy climax is an exception. Consequently, despite the big overnight range, day traders will be willing to sell, looking for a pullback to the bottom of the most recent leg up on the 5 minute chart. This was the rally that began overnight from 1.17 today or tomorrow.
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 trading above Friday’s high, the Emini triggered a High 1 bull flag buy signal. But since Friday was a bear doji and Thursday was a big bear day, this was a weak buy signal.
The Emini rallied in a 10 bar bull micro channel on the open on the 5 minute chart. That was strong enough buying to make a bear trend day unlikely. After a parabolic wedge selloff to a double bottom, it rallied again to a small new high. This was a Spike and Channel Bull Trend Day and a Bull Trend Resumption day.
Today was mostly a trading range day, but it formed another higher low after Friday’s higher low major trend reversal. The 5 minute trend is weakly up.
I have been saying that traders want another test above the February 24 high and into the weekly chart. They will probably get it this week and maybe tomorrow.
Traders might want to see one more test above the February 24 high before looking for a reversal down into August.
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.
Hey Al, If we get a test above the February 24 high again and into the weekly chart, this then gives us a strong monthly bull bar. Doesn’t this put the odds then as higher for August? To new highs, Instead of looking for one more test before we reverse back down?
Curious your take on this as you are maybe thinking both scenarios?
Thanks
I talked about this in the weekend blog. The stronger the month closes, the more likely August will be up.
Hi Al, just a follow up question – Does slow/quiet price action (like today) increase the likelihood of small pullback bull/bear trend day?
If the quiet trading is trending instead of sideways, a Small Pullback Trend up or down can last all day. However, the biggest ones usually start in the 1st hour or two, and not after an hour long selloff.
Also, they usually have at least a couple big breakouts in the 1st hour or two. Today did not have these features and therefore a huge rally was unlikely. Today’s Small Pullback Bull trend lasted for more than 4 hours, but it did not cover a lot of points.
If you were in the chat room today, you heard me repeatedly say after around 9 am PST that it was impossible for the bears to make money during the 1st 2 hours of the rally, and therefore it was better to only look to buy.
Later in the day, I said the market should reach its measured move target from the 9:40 am PST gap up, which it did in the final hour.
Thanks Al!