Emini and Forex Trading Update:
Thursday August 20, 2020
I will update again at the end of the day.
Pre-Open market analysis
Yesterday made a new high, but it was mostly sideways until the FOMC minutes. It then sold off sharply to just above Tuesday’s low. The bears were not strong enough to break below Tuesday’s low and create an oo sell signal.
But since it closed near its low, it is a sell signal bar for today. However, because the Emini has been in a Small Pullback Bull Trend since June, any reversal down will be minor. This is true even if it tests the June 29 Final Bull Flag low. Traders will expect a rally back up to this week’s all-time high later in the year.
The cash index has not yet broken far above the February high, and traders are wondering about a double top. Also, that streak of 9 consecutive bull days in the Emini that ended last week is still important. That is an extreme enough buy climax for traders to expect a 200 point pullback down to the start of the 9 day streak, which is the July 30 low just below 3200.
The Emini should begin to reverse down by the end of the month. The reversal might have begun yesterday. If there is strong follow-through selling over the next few days, then the reversal is probably underway.
If the Emini reaches that July 30 low, traders will then wonder about a 10% pullback, like after the 2018 streak and the June 2020 streak. That would be a test of the 3000 Big Round Number.
Tomorrow is Friday and the week so far is a small bear doji. Weekly support and resistance will become increasingly important. The bulls want the week to close on its high. The bears want the week to close on its low. At a minimum, they want the cash index to close back below the February highest close. That corresponds to around 3381 in the Emini.
Overnight Emini Globex trading
The Emini is down 13 points in the Globex session. It might gap down. But it is near the bottom of a 6 day tight trading range and the bears yesterday were not strong enough to push below Tuesday’s low. This increases the chance of disappointing follow-through selling today. However, yesterday is a good candidate for the start of a 200 point selloff over the next few weeks.
So far, this week is a small bear bar on the weekly chart. After 9 consecutive bull bars, this week will probably close below the open of the week and finally create a bear bar. It will then be a sell signal bar on the weekly chart.
But, because the Emini is just above the bottom of a 6 day tight trading range and there have been 9 consecutive bull bars on the weekly chart, the Emini will probably not form a big bear bar on the weekly chart this week. Traders should expect a close below the open of the week but not far below. Therefore, the Emini will probably be mostly sideways today and tomorrow and finish the week below the 3378.75 open of the week.
Yesterday’s selling was climactic. While there might be some follow-through selling in the 1st hour or two, there will probably be at least a couple hours of sideways to up trading that starts by the end of the 2nd hour.
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 reversed down yesterday from above a 3 week trading range. But this rally has had 6 consecutive bull bars. While climactic, it is relentless buying. Traders expect some buying today around yesterday’s close and below Tuesday’s low. Six consecutive bull bars do not typically reverse into a bear trend. The bears typically need at least a small double top.
The week is back near the open of the week. So far, this is the 4th consecutive week with prominent tails and a close near the open of the week. And it is coming at the resistance of the September 2018 high. I have been talking about that as a magnet for over a years. Finally, the weekly chart has rallied in a parabolic wedge since the March low. That usually will attract profit takers. Therefore, despite the huge 4 month rally, the EURUSD will probably be sideways to down for at least another month. At a minimum, it should test the breakout point above the June high within a couple months.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market sold off to just below yesterday’s low and reversed up. Traders expected that there would be no follow-through selling immediately after 6 consecutive bull bars.
The Emini will probably be sideways around the open of the week through the week’s close tomorrow. The fight will be over the close of the week. After 8 consecutive bull bars on the weekly chart, this week or next week should have a bear body. Therefore, traders will sell rallies, expecting the week to close at least 1 pip below the open. It is currently trading only 10 pips above the open of the week.
After 8 bull weeks, this week will probably not be a big bear bar. Therefore, traders will buy rallies down to around 1800.
Day traders will be scalping, looking for the EURUSD to trade sideways through the end of the week. It will probably close below the open and finally have a bear body on the weekly chart.
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
After gapping down, today rallied in a Bull Trend From The Open. It then entered a broad bull channel, as it often does after a strong open. This was a Spike and Channel Bull Trend Day.
Because it was a bull day on the daily chart, it is a High 1 bull flag buy signal bar for tomorrow. However, traders should expect a 200 point move down to the bottom of the 9 consecutive bull bars, and the move might have begun yesterday.
If the week closes with a bear body tomorrow, that will increase the chance that the Emini will trade lower next week. If the week closes on its low, that will make it more likely that the 200 point minor reversal down is underway. However, if the week has a bull body, the Emini might go a little higher before the selloff begins.
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.
Does the discussion of an Emini pullback to the 3000 – 3200 mean the recent consecutive bull bar climax on the Emini daily has eliminated the technical relevance of magnets in the 2600 – 2800 range? I’m still marking on charts, the breakout above the March 31 high around 2600 (not tested); the middle of the multi-year trading range around 2800; and a 50% retracement of the 4-month rally to around 2800.
Would like to understand if the conclusion is the best the bears can hope to achieve is an Emini pullback to the 3000 – 3200 range. And is the probability for newer highs / breakout of multi-year trading range a higher probability than the probability of a move to 2800 or below.
Thank you very much for everything you do to help us learn.
Al, you said there should have been follow through selling, but there was none.
So can we conclude this is a surprise bar and higher prices are more likely?
Honestly, all the pullback setup since April never actually amounted to anything.
I think what he said is UNLESS the follow through day of yesterday-which is today – is a big bear day, the collapse of the market might not have been on the way. Bulls prevented yesterday from being an outside down day, and daily chart is in TTR.
Yes, that is correct. I mentioned in the chat room that I went short when the cash index closed at a new high on Tuesday. Because of the Small Pullback Bull Trend on the daily chart, there was a risk that the bulls would buy the small pullback, and they did. I took profits on my shorts on the open today. There was a strong 1st bar and a possible wedge bottom from yesterday. I hoped to put the shorts back on if the rally stalled within a few bars, but today became a strong bull day. However, I still think the Emini will retrace the 9 bull bars soon, and I am looking for another opportunity to sell strength.
The Emini has been in a Small Pullback Bull Trend since June. Traders will continue to buy small pullbacks until one grows into a big pullback. After 9 consecutive bull bars, we should see a big pullback (at least to 3200) starting before the end of the month.
Sometimes the buy climax stretches out before there is a reversal, like in January 2018. That rally was stronger and I do not think this one will continue up for 2 weeks like that one.
Thansk Al, take care and stay safe..
Every tick gives more information. I think there is now only a 30% chance of 2600 – 2800 this year. But there is a 60% chance of 3200 within a couple months. That is a total retracement of the 9 bar streak. Streaks usually get erased completely.
The rally has been extreme so there will be fewer traders buying up here. Usually, trends evolve into trading ranges. We should see one begin soon and it could last for many months. But 3600 is likely within a year and maybe by the end of this year.