Emini and Forex Trading Update:
Wednesday August 12, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini broke to a new all-time high yesterday, but this followed 9 consecutive bull bars. That made it likely that yesterday would close below the open and finally form a bear bar on the daily chart, which it did.
Yesterday closed near its low. It is an outside down bar and sell signal bar for today for a double top with the February high. But because it closed above Monday’s low, the bears were not as strong as they could have been. That reduces the chance of a big bear breakout today.
Since 9 bull bars is a sign of persistent bulls, they will probably buy the 1st 1 – 3 day pullback. However, it is a buy climax. After 8 bull days in June, the Emini sold off 9%. After 9 bull days in January 2018, there were a couple brief legs up and then a 10% pullback.
Traders should expect a 10% pullback to begin sometime in August. They will then see this 5 month rally as forming a double top with the February high.
If yesterday is the start of the pullback, the bears will need follow-through selling today. It is more likely they will not get it. There have been many 1-day selloffs in the past 2 months. None has had follow-through.
That is why I have been referring to the 2 month rally as a Small Pullback Bull Trend. The bears will likely need at least a micro double top before a test down to 3,000 begins.
Since the 5 month rally has been strong, even a 10% selloff will probably be minor. There will probably then be at least one more test of the February high after the 1st selloff.
Overnight Emini Globex trading
The Emini is up 26 points in the Globex session. It will therefore open in the middle of yesterday’s range. The day after a big outside down day often is an inside day. A strong rally frequently reverses down from just below yesterday’s high and traders look for a reversal up from just above yesterday’s low.
An outside day is a sideways day. There now are 4 sideways day. Therefore, even if today breaks out of yesterday’s range, the breakout will probably be small. Traders expect a trading range day today. However, the selloff was big enough so that there will probably be a 2nd leg down this week before the bulls will be able to get much above yesterday’s high.
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 has been going sideways for 3 weeks at major resistance. Every trading range has both a reasonable buy and sell signal. This one has a double top and a double bottom bull flag.
A trading range is a Breakout Mode pattern. That means there is a 50% chance of a breakout and measured move in either direction. Furthermore, there is a 50% chance that the 1st breakout in either direction will fail.
If there is a successful bear breakout, traders will look to buy a pullback to support. That is around the June 10 breakout point or the June 19 higher low.
If there is a successful bull breakout, the rally will probably reverse after a week or two and begin a pullback to test the June 10 high. This is because a trading range in a buy climax is typically the Final Bull Flag. Traders expect the breakout to be brief and reverse down at least to the bottom of the flag.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market sold off to below yesterday’s low and then reversed up. The day’s range so far is small and the rally has not been especially strong. But it is coming from the bottom of a 3 week trading range. When a market is in a trading range, traders like to buy.
So far, day traders are mostly buying. Once the rally evolves into a trading range, some will look to sell reversals down for scalps.
The bulls want a reliable buy signal bar on the daily chart. They will therefore try to get today to close near its high.
The bears want the opposite. But after a reversal up from the bottom of a 3 week trading range in a bull trend, the best they will probably be able to get today is a close in the middle of the range. The odds favor the bulls today.
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
While the Emini made a new all-time high yesterday, the cash index did not. Institutional traders watch the cash index and mostly pay attention to the closing price. The cash index today got only about 1 point above the all-time highest close from February.
Today rallied on the open but was mostly sideways for the rest of the day. The bears tried to get a reversal down from an Expanding Triangle top at yesterday’s all-time high. Instead, the Emini went sideways. There was some profit-taking into the close.
The bulls want this week’s breakout to go far above the February high. But this rally is extreme. Traders expect a pullback before the Emini goes much higher. There is a 40% chance of a 10% pullback beginning soon.
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.
