Emini and Forex Trading Update:
Tuesday July 30, 2019
I will update again at the end of the day.
Pre-Open market analysis
Yesterday sold off on the open but reversed up weakly from the 60 minute EMA. It then formed a trading range day. It was a triangle on the 5 minute chart and that is a Breakout Mode pattern.
Because yesterday was an inside day in a bull trend, it is a buy signal bar. But there has been a wedge rally over the past 8 days. Also, the breakout above the July 15 wedge top might fail. Consequently, yesterday is also a sell signal bar. Since it had a bear body and the daily chart is in a wedge rally, the sell setup is slightly more reliable.
A triangle generates confusion, which typically results in more sideways price action. This is especially true with the uncertainty surrounding tomorrow’s 11 am FOMC announcement. Unless there is a strong series of trend bars up or down on the 5 minute chart in the 1st hour, day traders will look for reversals again today.
Overnight Emini Globex trading
The Emini is down 14 points in the Globex session. It will therefore probably break below yesterday’s triangle on the 5 minute chart. In addition, it might gap below yesterday’s low. That would trigger a sell signal on the daily chart for a 9 day wedge rally and a failed breakout above a 2 month wedge top.
The context on the daily and weekly charts is good for a 2 – 3 week pullback down to around 2900. There is therefore an increased chance of a bear trend day today. But with the uncertainty surrounding tomorrow’s FOMC announcement, traders might decide to wait until after the announcement before creating a big trend day 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 formed a micro double bottom over the past 3 days. Today triggered the buy signal by going above yesterday’s high. The bulls want a 2 – 3 week reversal up, just like they got after every other new low over the past year.
There is no sign that this pattern has ended. Consequently, they will probably get their rally beginning within a week. What is unknown is how all financial markets will react to tomorrow’s FOMC announcement. It is possible that there will be a brief strong break below this week’s low before the reversal up begins.
Patterns do not last forever. This bear channel has gone on for a year. Bear channels typically have bull breakouts and lead to trading ranges. But the bears are hoping for a strong breakout below the 5 month range and the the start of an even stronger bear trend. If they get consecutive big bear bars closing on their lows, traders will conclude that there will be a successful bear breakout. Without that, the odds favor another 200 – 300 pip rally for a few weeks.
Overnight EURUSD Forex trading
The EURUSD 5 minute chart traded above yesterday’s high. Yesterday was a bull bar on the daily chart and therefore a buy signal bar for a failed breakout below the 5 month range. Since there is a 3 day micro double bottom, this is a stronger buy setup.
However, instead of rallying strongly above yesterday’s high, the overnight breakout has been small. Furthermore, the 5 minute chart reversed back down below yesterday’s high. This is not how successful breakouts typically behave. Traders might be waiting for tomorrow’s FOMC announcement before deciding if the reversal up or the bear breakout will succeed.
Since the overnight range has only been 30 pips, day traders have been scalping. The 2 key prices today are yesterday’s high and today’s open. The bulls want today to close above its open. There would then be a bull body on the daily chart.
Additionally, they want today to close above yesterday’s high because yesterday is a buy signal bar on the daily chart. Finally, they want a big bull trend day. However, today’s small range and tomorrow’s FOMC announcement make a continued trading range day more likely.
The bears always want the opposite. They especially would like today to close on its low. Today would then be a sell signal bar for 4 day bear flag on the daily 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. 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
After a gap down and a brief rally, the Emini entered a tight trading range. It went sideways for several hours, and then the bulls got brief trend resumption up. The rally was a bull trap and the Emini drifted back down into its 4 hour trading range.
Tomorrow’s 11 am FOMC announcement will be unusually important. Day traders should exit their trades ahead of the report. The initial move on the report usually quickly reverses. Day traders therefore should wait until at least 10 minutes after the report before trading again.
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.
How would you have managed the 76 buy if you had taken it? (Surprise bull bar up closing at EMA at 12:50PM PST)