Trading Update: Wednesday August 4, 2021
Emini pre-open market analysis
Emini daily chart
- After an outside down day on Monday (traded above Friday’s high and then below its low), yesterday traded below Monday’s low and reversed up to above Monday’s high. An outside up bar.
- It is therefore a 2nd consecutive outside bar. This is an OO (outside-outside) setup, which is a Breakout Mode pattern. Traders theoretically will buy above and sell below.
- Because it is coming in a strong bull trend and on a reversal up from the bottom of an 8-day tight trading range, and yesterday closed with a big bull body, a bull breakout is more likely.
- Since the daily chart is in Breakout Mode, the breakout could be strong and last for a few days.
- Friday’s unemployment report is the next catalyst. The Emini might continue its tight range until the report.
- What about a bear breakout? For over a year, the bulls have bought every strong 1- to 3-day selloff. They will continue to do that until it no longer works. That would require a big move down and probably more than just 3 days down. Until then traders will continue to expect higher prices.
- On the monthly chart, July closed near its high, and it was the 6th consecutive bull bar on the monthly charts. I have been saying that August should trade above the July high. Yesterday could be the setup that leads to that new high.
Emini 5-minute chart and what to expect today
- Emini is down 9 points in the overnight Globex session.
- Since yesterday was a Spike and Channel Bull Trend, 75% chance today will break below the bull trend line. Typically leads to trading range and often tests start of the channel, which was around 4395 yesterday.
- 25% chance of strong break above top of bull channel and then the start of another leg up.
- With consecutive outside days on daily chart, can bears get an outside down day? Unlikely. However, they could get a bear trend day that stays within yesterday’s range. An inside day is common after an outside day.
- There would then be an ioi (inside-outside-inside) setup on the daily chart. That would be another Breakout Mode pattern, and it would not change anything because the chart is already in Breakout Mode.
- If today is a bear day closing on its low, it would slightly increase the chance or a bear breakout.
Yesterday’s Emini 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. Buyers of both 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. These therefore are swing entries.
It is important to understand that most swing setups do not lead to swing trades. As soon as traders are disappointed, many exit. Those who exit prefer to get out with a small profit (scalp), but often have to exit with a small loss.
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
EURUSD Forex daily chart
- After consecutive wedge bottoms on July 21, odds favor 2nd leg sideways to up.
- If sells off for a few days, bulls will buy the selloff, expecting a higher low and a test of the start of the bear channel. That is the June 25 major lower high.
- Sideways for 5 days at the July 6 minor lower high so Breakout Mode. Today so far is 4th doji bar so neutral for 5 days. Increased chance that today will remain sideways.
- Bears want a double top bear flag with July 6 high and a break below the July low.
- More likely will reach June 25 lower high before breaking below July low. Traders are deciding if it needs to test down first.
- Market might be waiting for Friday’s unemployment report.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
- Bull trap rally to EMA on open, then bear channel.
- Reversed up from wedge bottom at 50% retracement of yesterday’s rally.
- Reversed down from nested wedge rally to lower high.
- Today remained a trading range day, but closed near the low.
- Yesterday was the 2nd consecutive outside day. Today was an inside day. There is now an ioi on daily chart. Still in Breakout Mode ahead of Friday’s unemployment report.
- 9 consecutive days around 4,400 Big Round Number so increased chance of more sideways tomorrow.
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 Time
When I mention time, it is USA Pacific Time. The Emini day session charts begin at 6:30 am PT and end at 1:15 pm PT which is 15 minutes after the NYSE closes. You can read background information on the market reports on the Market Update page.
Dr. Brooks,
Would appreciate your insights on surprise bars we saw yesterday in E-mini. In a strong bear BO, bears see it and sell, and bulls will exit longs thinking another leg down. Shouldn’t this become self fulfulling and extend the bear leg down? What thinking goes in traders’ mind who contribute in making surprise bars (two in single day) especially when there is no catalyst? Thanks!
It’s computers and no one’s mind. I talked about it in the chat room today. It was just a sell vacuum test of the bottom of the 8-day tight trading range. A sell climax at support with a High 2 bottom is a buy setup.
Also, I often point out in the chat room that every strong move on the open has a 50% chance of simply being a test of support or resistance. This means there is a 50% chance of an abrupt reversal, like yesterday. Experienced traders know this. They sell the Bear Trend From The Open, but are ready for a possible reversal and will get long if it happens.
Thank you!