Emini and Forex Trading Update:
Friday August 30, 2019
There will be no update at the end of the day due to Al travelling.
Pre-Open market analysis
I have been writing about the importance of the monthly chart since June went outside up after May was outside down. July triggered the oo bull flag buy signal on the monthly chart. At that point, there was a 60% chance of sideways to up trading for at least 3 months.
While August sold off early in the month, the Emini is now back to the 2917.38 midpoint of the August range. That was a magnet yesterday and it might be a magnet today. Why? Because if the Emini closes the month above its midpoint, it is a sign of strong bulls. The bulls will have owned the month, at least by a little, despite the big early selloff.
Yes, yesterday’s gap up helped the bulls. But the bulls need today to close above the August midpoint. That would increase their chance of resuming the bull trend up to a new high.
The rally this week is strong enough so that the bulls might even get the day to close above the open of the month. August would then have a bull body on the monthly chart. It would then be a High 1 buy signal bar for September.
Overnight Emini Globex trading
The Emini is up 16 points in the Globex session. If it opens here, it will be at the top of the 4 week trading range. The bulls would like today to close above the top of the trading range. That would increase the chance that the June/July bull trend has resumed and that this rally will continue up to a new all-time high.
While today will gap up, the Emini will still be about 40 points below the open of the month. That monthly magnet is probably too far above for the bulls to get there today. The midpoint of the month is 26 points below and could still be a magnet at the end of the day. More likely today will close between both monthly targets, and focus more on the weekly target of the high of the 4 week trading range.
When a market gaps up to a resistance level and the next higher resistance is far above, it tends to oscillate around the resistance. Consequently, there is an increased chance of a trading range day centered around the top of the 4 week range.
If that happens, that price will be a magnet at the end of the day. That means traders should expect it to get tested late today. This could result in a brief strong trend in the final hour to above or below the top of the range.
EURUSD Forex market trading strategies
The EURUSD daily Forex chart has sold off for 5 days after a sharp rally to the EMA. While it is still above the August low, the selloff is more likely a resumption of the yearlong bear channel than a pullback from the rally 3 weeks ago.
As strong as the selloff has been, it is important to note that there have been many other strong selloffs over the past year. Every new low reversed up within days and led to a 2 – 3 week bull leg in the bear channel.
Will the price action change? For example, will the bears get a strong breakout that lasts several weeks, creating a stronger bear channel? Markets have inertia. That means they resist change. It is more likely that the behavior of the past year will continue.
Consequently, traders will continue to look for a reversal up within a week or two until there is a new low with consecutive big bear bars closing near their lows. If the bears get that, traders will look for several weeks down below the August low before buying again.
Overnight EURUSD Forex trading
The EURUSD 5 minute chart sold off early in the European session to below yesterday’s low, but it has been in a 15 pip trading range for the past 6 hours. Traders are deciding if the selloff will continue to below the August low.
That target is only 6 pips below the overnight low. Can today break strongly below that low? This is unlikely because the bears will not gain much by doing that. They have already convinced traders that the rally from 3 weeks ago was just a bull leg in the yearlong bear channel. They would need a 50 pip selloff from here today to make traders believe that the bear channel is evolving into a bear breakout. That would represent a change in the yearlong behavior and it is therefore unlikely.
What about the bulls? Can they get a strong reversal up today? Probably not. The bear channel over the past week has been tight. A tight bear channel typically has to transition into a trading range before there will be a strong rally.
Weekly and monthly targets are important today
If today will probably not go far up or down, what is left? A trading range day. Today will probably focus on the August low and last week’s low. If the bears can close the day, week, and month below both, there will be an increased chance of a bear breakout below the bear channel over the next few weeks. If the bulls can get the week to close above both, it will increase the chance that there will be a reversal up within 2 weeks and the yearlong bear channel is continuing.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
No summary today due to Al travelling.
See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.
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.