Emini and Forex Trading Update:
Thursday July 30, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini yesterday rallied back into the gap on the weekly chart above the February 24 high. I have been saying it probably would do that.
The bulls want a new all-time high, which would require a move into the gap. Yesterday was a big bull day. Traders expect at least slightly higher prices today.
Many bears want to see the Emini reverse down in the February gap for a 2nd time. That would increase the chance of a swing down on the daily chart. The are hoping that the 3 day rally is just a pullback from the selloff from the July high.
Traders should find out within a week if the Emini will make a new high or reverse down from a double top with the February high.
Friday is the final day of the month. If the bulls can get July to close near its high, traders will expect at least slightly higher prices in August.
Overnight Emini Globex trading
The Emini is down 27 points in the Globex session. Yesterday’s rally was in a bull channel. Since there is usually a break below the channel, traders should think of it as a bear flag. Today will probably open below the bull channel.
Channels typically evolve into trading ranges. Consequently, a trading range is likely today. But the legs will probably be big enough for swings up and down.
Can today be a big bear trend day? The June high is a magnet below with 2 days left to the month, so yes, today can trend down.
Can today rally strongly? Probably not. The bulls have already accomplished all that they need for July. The next magnet above the is the top of the February gap and that is likely too far above for this week.
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 rallied strongly up to the resistance of the September 2018 high. That was the start of the 2 year bear channel.
The rally from the March low has 3 legs. It is therefore a wedge bull channel and a buy climax. In addition, the rally of the past 3 weeks has 3 legs up in a tight bull channel. It is therefore a parabolic wedge buy climax. With 2 buy climax patterns at resistance, traders should expect some profit taking to begin within a week or so.
Yesterday’s high might be forming a micro double top with Monday’s high. This is in addition to the possible double top with the September 2018 high.
As strong as the rally has been over the past 3 weeks, this kind of price action is what traders typically see just before the bulls take profits. Traders should expect a 200 pip pullback to around the EMA to begin before the EURUSD breaks much above 1.18.
When a bull trend is as strong as this one has been, there will be many traders eager to buy a pullback. Therefore, a pullback is more likely than a reversal into a bear trend.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market has been going sideways for 4 days. The bulls hope that this is a pause in the bull trend and that the rally will soon break above the September 2018 high.
Every trading range has both buy and sell setups. The bears are hoping that yesterday’s high formed a double top with Monday’s high. If not, they hope that a move above Monday’s high will reverse down. There would then be a wedge top this week.
Because the EURUSD has been sideways for 4 days, day traders are looking for small swings lasting a few hours and for 10 – 20 pip scalps. After such a strong rally for several weeks, there will probably be a lot of back and forth trading over the next couple weeks. That means smaller swing trades and more scalping.
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 strongly today from the bottom of its 2 week trading range. It began with a selloff to just above last week’s low and then it reversed up sharply. There was a small double bottom and therefore a High 2 2nd reversal up from below yesterday’s low. The buy signal bars were big and closed near their highs. This led to a huge rally to back into the February gap. The Emini went sideways for the 2nd half of the day around the bottom of the February gap, and rallied again to yesterday’s close in the final minutes.
Tomorrow is the last day of the week and off the month. Traders are deciding if the Emini will close above or below the June high. If it closes above, August will probably be at least a little higher. If it closes below, July will still have a big bull body, but it will not be as strong.
The February gap and the June high will be magnets tomorrow, especially in the final hour. Tomorrow’s close can affect what the Emini will do in 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.
Hi Al,
First of all, thanks a lot for the time and effort to show us your entries after the trading session. They help me track my progress quite a bit.
I have a question regarding the open here. I sold candle 6 in what I interpreted was a sell the close situation, but got out on the next bar as it was strongly bullish.
Then I sold candle 9 only to get out in 11 for the same reason.
You didn’t mark bars 6 and 9 as valid sell signal bars. What was the reason for that? I also noticed the TR in the globex session, and the first bars were a strong BO from that TR as well.
Thank you very much for your help!!!
I sold below 6 also, and stopped out above 11 after the wedge bottom and double bottom and three strong buy signals. my question is when there is a strong reason to buy, is it also a strong reason to reverse the position when stopped out on shorts? Thanks.
If I remember correctly from the course, Al doesn’t recommend getting out of a bad trade and reverse your position right after, but that you could do it if you felt comfortable with that. I guess it depends on you. Probably you’re the best person to answer that question, through trial and error.
Bar 5 was a big bar after a trend down so likely a sell climax and close to a pause or two-legged bounce. Bars 7 & 8 were the first leg of that bounce so expect a higher low and a second leg up which today turned into a strong trend day up. I’m guessing Al marked bar 15 as a sale because it could have been the end of the two-legged bounce and a lower high resumption of the down trend.
You’re totally right. I interpreted that big bear bar as a BO from a TR on the Globex chart, so I thought it would continue going down. My assumption was right, only that I just took a measured move of that TR and price reached that MM down to then create a tight bull channel. So that MM was actually the climax you talk about. My bad!