Emini and Forex Trading Update:
Wednesday July 29, 2020
I will update again at the end of the day.
Pre-Open market analysis
Today is an FOMC day. There is a sharp move up and down 70% of the time in the 1st few minutes after the 11 am PST announcement. Day traders should exit positions ahead of the report and not trade again for at least 10 minutes afterwards. Since the reaction after an FOMC announcement can be extreme, day traders today should be ready for anything after the 11 am PST report.
The Emini is in a buy climax at the resistance of the all-time high on the daily chart. There is therefore an increased chance of a big move up or down starting within 2 weeks, and possibly today.
The importance of the February gap
Many bears do not want to sell until there is one more test into the weekly gap above the February 24 high and then a 2nd reversal down. Yesterday’s high was 2 points below that target. That might be all that the bears get. We will find out over the next week or two.
June was the 3rd consecutive bull bar on the monthly chart. But its small body and big tail are signs of a loss of momentum at the old high. Friday is the final trading day of the month. The June high therefore will be important at the end of the week.
The July close is important
If this month closes far above the June high, traders will expect higher prices in August. That means a new all-time high. If instead July closes far below the June high, traders will expect lower prices for a month or two. If July closes near the open of the month, August might be sideways for a 3rd consecutive month.
While the low of the month is about 120 points below yesterday’s close and there are only 3 days left, there is a 20% chance that the Emini will get there by Friday’s close. Do not be surprised if there is an extreme move up or down by the end of the week.
Overnight Emini Globex trading
The Emini is up 8 points in the Globex session. Yesterday ended with a sell climax. There is only a 25% chance of a strong bear trend day today, but there is a 50% chance of at least some follow-through selling in the 1st 2 hours. Also, there is a 75% chance of at least a couple hours of sideways to up trading that starts by the end of the end hour.
Because yesterday ended in a tight bear channel, the 1st reversal up today will probably be minor. The bulls typically will need some kind of test of yesterday’s low before they can get a bull trend reversal. The selling usually has to stop for an hour or two before relentless buying can begin.
Day traders should exit ahead of the 11 am PST FOMC announcement. Also, they should wait at least 10 minutes before resuming their day trades.
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 sideways for 3 days after a parabolic wedge rally over the past 2 weeks. Traders expected at least a small 2nd leg up after the big bar on Monday. Yesterday was down and today tested yesterday’s high. Today therefore has met the minimum expectations of the bulls.
The bulls who bought Monday’s close were disappointed by yesterday being a bear day. Today tested Monday’s close allowing those bulls to exit without a loss.
We will find out over the next few days if the bulls are starting to exit. We will know if there is a big bear day today or tomorrow. If so, the EURUSD will likely pull back for a couple weeks.
It is currently equally likely that there will be one more 1 – 3 day rally to the September 2018 high before the pullback begins.
ii Breakout Mode pattern
Today’s high so far is below yesterday’s high and its low is above yesterday’s low. It is therefore so far an inside day. Yesterday was also an inside day.
Consecutive inside days form an ii (inside-inside) pattern, which is a Breakout Mode pattern. When it comes late in a trend, it is both a bull flag and a micro double top.
If there is a bull breakout, the ii is typically the Final Bull Flag. Traders expect a reversal down within a few days.
At 11 am PST today, there is an FOMC announcement. It will affect all financial markets. Consequently, today will probably not remain an inside day.
Yesterday is a High 1 bull flag, but a bull breakout will probably reverse down, like in June. There is a micro double top so a selloff could begin a 2 week pullback.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market reversed down from a rally to just below yesterday’s high. It sold off 50 pips, but so far is holding above yesterday’s low. It might remain an inside day until the FOMC announcement at 11 am PST. If so, day traders will scalp for 10 – 20 pips.
Because the FOMC announcement often leads to a big move up or down, traders view today as 2 different sessions. Today will probably be in a trading range until the report.
Once the report comes out, day traders should wait at least 10 minutes before trading. This is because there is usually at least one big reversal in the 1st 10 minutes.
They then have to be ready for anything. There could be a big trend up or down, a big reversal, or a trading range.
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
Today began as a bull trend from the open. The Emini made it back into the gap above the February 24 high, which I have been saying was likely. Then, it went sideways into the 11 am PST FOMC report.
After the report, the Emini rallied to about a measured move up from the 2 hour trading range. It then reversed back down to the bottom of the February gap. The bull channel resumed up into the close.
Today was a big bull day on the daily chart. That increases the chance of at least slightly higher prices tomorrow.
There are 2 days left to July. The bears needed to begin a reversal down this week. It is now too late for them to get a significant reversal down in July. As long as the bulls can keep July’s close above the June high, traders will expect at least slightly higher prices 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, can you explain a bit about ledges, I know you have mentioned in the room that they are an area that typically gets tested (magnet) what percent likelihood would you place on it getting tested? Thanks
Should we close below June’s high then we are looking at a sideways month of August?