Emini and Forex Trading Update:
Monday July 7, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini formed an outside up candlestick last week on the weekly chart. It broke above last week’s high yesterday, but the breakout was small. The Emini is near the top of the 5 week range, which is also the June high.
With June being a doji bar on the monthly chart, July might fail to break above the June high. However, the bears will probably need at least a micro double top on the daily chart before they can get a reversal down. That means that the bulls plan to buy the 1st 1 – 2 day pullback.
The end of the quarter rally continued yesterday, but it typically ends around July 5. Consequently, traders should get a brief pullback this week.
Overnight Emini Globex trading
The Emini is down 24 points in the Globex session. It will therefore gap below yesterday’s close and possibly below yesterday’s low.
After a 5 day rally, traders expect a 1 – 2 day pullback. But they also think a reversal down from here will only last a day or two. That reduces the chance that a gap down today will be the start of a big bear trend day.
Can today trade below yesterday’s low and then above yesterday’s high? Yes, especially since yesterday’s range was small. But after a 5 day rally in a tight bull channel on the 60 minute chart, traders expect that a move below yesterday’s low will probably instead begin a 1 – 2 day pullback. Day traders are looking for a sideways to down day today.
A big gap down usually results in a trading range open for the 1st hour or two. The bulls will look for a double bottom or wedge bottom to buy for a swing up. The bears will look for a double top or wedge rally to sell for a swing down.
The day might spend a lot of time oscillating in a range between the 60 minute 20 bar EMA, which is just below 3140, and last week’s high, which is just below 3160 and around yesterday’s low.
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 a month. It broke above a triangle yesterday, but not above the June 23 lower high.
Traders see the overnight reversal as a pullback from yesterday’s breakout. However, they know that as long as the EURUSD remains in the trading range, it can never be more than slightly bullish or bearish.
The bears see yesterday as a test of the June 23 high. A selloff from here would be a double top lower high major trend reversal.
Traders expect reversals every couple days. They therefore are buying low, selling high, and taking quick profits. This results in a continuation of the trading range.
This week broke above an ii pattern on the weekly chart (consecutive inside bars). But the EURUSD is currently back below last week’s high. Therefore the breakout is not yet successful.
A month is a long time for a tight trading range. Traders expect a successful breakout up or down within a couple weeks. But until there are a couple consecutive big trend bars up or down, they will continue to bet on reversals.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market sold off overnight from below yesterday’s high. However, over the past couple hours, it reversed up from above yesterday’s low. Therefore, today is an inside bar on the daily chart.
The rally has retraced about half of the selloff. Many bulls will start to take profits and the bears will begin to look to sell again. This will probably result in 1 – 2 hour leg sideways to down. That means day traders expect a trading range to begin soon on the 5 minute chart. Day traders will scalp for 10 to 20 pips up and down.
The bulls want the reversal up to get above the open. That is only 20 pips above. Today would then have a bull body. Traders would see it as a more reliable buy signal bar on the daily chart for a pullback from yesterday’s breakout.
The bears, however, want today to close near its low. Today would then be a sell signal bar for a double top on the daily chart.
Which is more likely? Neither. In a trading range, confusion is most likely. Therefore, today will probably have a bear body, but it will probably not close on its low. It will then be both a bad buy and sell signal bar for tomorrow. Traders would expect more sideways trading tomorrow.
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 rallied from below yesterday’s low but reversed down from just below yesterday’s high. This is an Almost Outside Up day. The rally was in consecutive parabolic wedge buy climaxes. The selloff continued down for about a measured move based on the initial rally.
Because the Emini closed near its low, today is a sell signal bar for tomorrow. The bears see today’s reversal as a micro double top with yesterday’s high. It is a possible failed breakout above the 3 week trading range.
However, today was the 1st pullback on the daily chart in 5 days. It is therefore more likely that the Emini is pulling back for a couple days than reversing down to the bottom of the 3 week range.
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
About end of day summay, you wrote the bears see today’s reversal as a micro double top with yesterday’s high.
But yesterday is bull bar and breakout the trading range, it’s good for bulls, so I think it’s not a top, so what’s the meaning of micro double top, is it on 5 min chart?
Hi Grego,
Al is referring to the daily chart where a Micro Double Top has formed. Not the 5 minute chart.