Emini and Forex Trading Update:
Tuesday September 1, 2020
I will update again at the end of the day.
Pre-Open market analysis
Today is the 1st day of September. The bulls had a gap up in August and August closed near the high of the month yesterday. The bulls want another gap up today for a 2nd consecutive gap up on the monthly chart. But, today so far is trading 5 points below the August high in the Globex session with 45 minutes to go before the open. That makes a monthly gap up unlikely.
Because of the 2 streaks of 9 and now 7 consecutive bull days on daily chart, the Emini will probably reverse down about 10% starting this month. It could begin after a brief break above the August high. Consequently, traders should be looking for a possible swing down beginning soon.
Since there is a bullish tendency in the week before Labor Day, the selloff might begin next week. However, this is a very overbought market and profit taking can come quickly and at any time. Until it does, traders will continue to buy every intraday selloff, betting on higher prices.
Overnight Emini Globex trading
The Emini is up 8 points in the Globex session. The bulls want to get back to the Globex high by the end of the session because that high is above the August high. September would then gap up on the monthly chart. However, the bars over the past several hours have been small. There might not be enough energy to get the monthly gap up.
If there is a monthly gap up, it will probably be small. Small gaps up typically close before the bar ends. That means before the end of September.
After 5 strong bull bars on the monthly chart. September will probably trade above the August high. It might do that today. However, because of the buy climax on the daily chart, the Emini will probably not go far above the August high before reversing down for a few weeks.
Yesterday was the 1st bear day in 8 days on the daily chart. It is therefore a sell signal bar for today. But because it had a big tail below, there will probably be buyers below. This is especially true after 7 consecutive bull days. However, if the Emini goes sideways here for a few days, the bears might be able to form a micro double top. They would then have a better chance of a reversal down.
The past 3 days were mostly sideways. Day traders will expect more trading range price action today. The legs up and down were big enough for swing trading. Day traders will therefore look for at least one swing up and one swing down today as well.
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. 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 was mostly sideways in August, but it made higher highs and lows. There was therefore a wedge top. Today is breaking above the wedge top. Now that September went above the wedge top, there is a 50% chance of a successful breakout and a couple legs up to a measured move. The odds will go up if there are consecutive closes above the August 18 top of the wedge.
There is also a 50% chance that the breakout will fail and the EURUSD will reverse down. The bears will need a bear reversal bar within the next week. It is important for the bears to prevent 2 consecutive closes above the August 18 high if they expect the breakout to fail.
On the monthly chart, July was a big bull bar that broke above the 18 month bear channel and the September 2018 high. August was the follow-through bar. Since it had a bull body, September was likely to go at least a little above August high. It has done that on the 1st day of the month.
The weekly chart has a parabolic wedge rally. That typically soon attracts profit takers. Also, there was a streak of 8 consecutive bull bars that ended 2 weeks ago. That, too, is a buy climax and usually leads to profit taking. Consequently, the odds still favor a pullback beginning in September and lasting several weeks. But there is no sign of a top yet.
With today’s high so far being just below the 1.20 Big Round Number, the odds are that the EURUSD will hit that price this week and then decide whether to break strongly above it or reverse down.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market rallied early overnight to above the August high. However, it has been in a 40 pips trading range since. While a trading range in a bull trend is still a bull flag, day traders have been buying low, selling high, and scalping for over 6 hours. There is no sign that this is about to end.
Because today is a breakout on the monthly chart, there is an increased chance of a big trend up or down. However, the 6 hour trading range make it more likely that today will remain in a trading range in the US session.
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
The Emini rallied from above the low of yesterday and the 60 minute EMA to above yesterday’s high. That was also the August high and a target for September.
Although it spent a lot of time within tight trading ranges, there was also a bull channel up from a cup and handle buy setup. With it closing near the high, there is an increased chance of a gap up tomorrow. The strong bull trend on the daily chart might accelerate into a blow-off top.
As strong as the Small Pullback Bull Trend has been for 3 months, the streaks of 9 and 7 consecutive bull bars is a problem. They make a 10% pullback likely to begin at some point in September.
There is no top yet so traders continue to buy. However, they will be quick to sell if there is a reversal. This is because the stop for the bulls is far below and no one wants the stop to be hit. They do not want to give back that much profit. Instead, the bulls will rush to exit once this starts to turn down. That can create a surprisingly fast selloff en route to a 10% pullback.
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.
Wasn’t bar 28 good long entry? I thought it was wedge high2.