Emini and Forex Trading Update:
Wednesday August 28, 2019
I will update again at the end of the day.
Pre-Open market analysis
Yesterday triggered a buy signal on the daily chart. But I said before yesterday’s open that it was a weak setup. Entering with stops in the middle of a 4 week trading range is low probability trading.
Yesterday sold off in a Small Pullback Bear Trend. It evolved into a trading range in midday. Since it was a bear day on the daily chart, it is a sell signal bar for today. But the problem remains. Entering with stops in the middle of a 4 week trading range is a losing strategy. There will probably be more buyers than sellers below yesterday’s low.
When a market is in a trading range, it tends to spend most of its time around the middle. Consequently, the Emini might be sideways for another day or two.
Overnight Emini Globex trading
The Emini is down 8 points in the Globex session. There might be a small gap down open. That would trigger a sell signal on the daily chart. But since the Emini is in the bottom half of a 4 week tight trading range, the sell signal is minor. That means that the odds of a big bear trend day are less.
The bears want follow-through selling after yesterday’s bear trend. However, the Emini has been reversing every couple days for the past 4 weeks. Therefore it is equally likely that if there is a trend today, it will be up.
Sell climaxes typically lead to trading ranges. Yesterday was in a trading range for the 2nd half of the day. Traders expect that today will continue that range. They therefore will look for reversals up and down unless there is a strong breakout up or down.
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. 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.
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.
EURUSD Forex market trading strategies
The EURUSD daily Forex chart has sold off for 3 days after going above a big bull outside up bar. As long as the selloff remains above that bar’s low, the bulls will assume that the selloff is a pullback from that bull trend reversal. They see the daily chart as forming a higher low reversal up from the bottom of a 5 month trading range.
But it is equally likely that the outside up bar was a pullback to the EMA from the 5 day selloff of 2 weeks ago. When there is both a credible buy and sell setup, the chart is in Breakout Mode. It is in the middle of a 9 day tight trading range. Until there is a breakout, there is no breakout.
That 9 day range is at the bottom of a 5 month trading range and a yearlong bear channel. Every breakout to a new low over the past year reversed up for several weeks. Traders therefore believe that there is not much downside risk over the next few weeks. The EURUSD is in the buy zone, but it might have to fall below the August low before the bulls will buy aggressively.
That is what the market is currently deciding. Is the bottom for the next few weeks in, or will there be another brief leg down?
It is important to understand that the yearlong bear channel will end at some point. There is only a 25% chance of a strong bear breakout and then an acceleration of the bear trend. Most bear channels have bull breakouts and evolve into trading ranges or bull trends. But there is no sign that the channel is about to end.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart overnight barely broke below yesterday’s low, but the range is small and it is going sideways around that low. Day traders are scalping. They are buying reversals up from the bottom of the overnight range and selling reversals down from the top.
Traders expect the 9 days of tight trading range price action to end soon. Once there is a strong breakout up or down, day traders will switch to swing trading. There is no sign that the breakout is about to happen.
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. 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.
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.
End of day summary
The Emini triggered the sell signal on the daily chart by going below yesterday’s low. But, stop entries in the bottom third of a tight trading range are bad bets. The bulls bought just below yesterday’s low and today reversed up into a bull trend.
Because today has a bull body, it is a buy signal bar for tomorrow. However, it is a weak buy signal since the Emini is still in the middle of its 4 week tight trading range.
Since this week is a small inside bar on the weekly chart, this week might be a doji bar once the bar closes on Friday. Unless the Emini moves far from the open of the week, the open might be a magnet for the rest of the week.
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 Intraday Market Update page.
