Emini and Forex Trading Update:
Tuesday August 18, 2020
I will update again at the end of the day.
Pre-Open market analysis
Yesterday gapped up on the daily and weekly charts. The bulls want a successful breakout above the 3 year trading range and at least a couple legs up. Today might gap up again, extending the buy climax, which is already stretched.
But this gap is late in a 5 month bull trend and at the top of a 3 year trading range. There is therefore an increased risk of a reversal down. This is especially true after the streak of 9 consecutive bull bars that ended a couple weeks ago.
When the gap up on the daily chart is big, like yesterday’s was, the Emini often goes sideways for a few days before traders decide whether the breakout will succeed of fail. Yesterday was a trading range day, even thought it rallied into the close. Traders expect another trading range day today. But no one would be surprised by a trend day up or down.
If this breakout fails, it could fail with an island top. A gap down this week would create one. Alternatively, it could fail with just a reversal down. Then yesterday’s gap would be an exhaustion gap. For example, if today gaps up and sells off to below yesterday’s low, today would be a big outside down day. That would be an early sign of profit taking.
There are 5 trading days left to August. At the moment, August is a big bull bar on the monthly chart. However, a bar often changes just before it closes. It could become a bigger bull bar, or it could have a big tail on top. There will be an increasing chance of a surprisingly big move up or down later in the week.
Overnight Emini Globex trading
The Emini is up 13 points in the Globex session. It might gap up again today. The buy climax on the daily chart is extreme. It includes a streak of 9 consecutive bull days. This increases the chance of a swing down for a few weeks starting at any time.
Also, a strong trend often attracts profit taking before a higher time frame bar closes. The candlestick on the monthly chart closes on Monday. That increases the chance of some selling at the end of the month.
However, there is no sign of a top yet. Even though a lot of the recent days have been mostly sideways on the 5 minute chart, day traders keep creating bull breakouts, extending the bull trend on the daily chart.
Because there is an increasing risk of a sharp swing down, day traders are ready to sell. They are looking for an intraday top, like a midday major trend reversal, or a Bear Trend From The Open. As I said, today could gap up and then sell off to below yesterday’s low. This would create an outside down day. Despite the strong bull trend on the daily chart, day traders will be quick to sell for a swing down if the bears begin to get consecutive big bear bars on the 5 minute chart.
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. This is a Breakout Mode pattern. Traders look for either a measured move up or down. Every trading range has both a buy and sell setup. The bears have a wedge top and the bulls have a higher low after a double bottom.
Yesterday was an inside day after an outside day. That is an ioi Breakout Mode pattern and it is within the 4 week bigger Breakout Mode pattern. So far, today is a 2nd inside day. This is an ii, which is a Breakout Mode pattern. The ioi has now grown into an ioii (inside-outside-inside-inside).
When there is a Breakout Mode pattern, there is a 50% chance of a successful breakout up or down. Furthermore, there is a 50% chance that the 1st breakout up or down will fail. Until there is a clear breakout, traders bet on reversals every day or two and take quick profits.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market so far today is forming a 2nd consecutive inside day. Day traders are scalping reversals for 10 pips.
Today’s range is small and the daily chart is at the apex of a Breakout Mode pattern. Day traders will continue to scalp until there is a breakout up or down. They will then swing trade.
When a market is very tight like this, there is an increased chance of a strong breakout coming at any time. While waiting, day traders scalp.
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
The Emini opened with a small gap up. Small gaps usually close early in the day, and this one closed on the 2nd bar. The Emini then entered a trading range for 3 hours. After a double bottom, it rallied in a Small Pullback Bull Trend for the rest of the day.
The daily chart has been in a Small Pullback Bull Trend since late June. While the rally is extreme, there is no reversal yet. Traders will continue to buy every 1 – 2 day pullback until the bears get a clear top or strong reversal down.
There are only 4 trading days before the candlestick on the monthly chart closes. The Emini is at the high of the month. There is often some profit taking just before a bar closes. Therefore, there is an increased chance of a 1 – 2 bar pullback before the end of the month.
If there is a gap down on any day, there will be an island top with yesterday’s gap up. However, island tops and bottoms are usually only minor reversal patterns, especially in strong trends.
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.
Al, do you watch and trade pre-post hour emini? If not, is it because of the low volume? thx
I sometimes trade in the evening if I have nothing special to do, especially during the pandemic. The low volume is not important. The computers are always there and are ready to dump infinite volume at any time. The Emini is a 24 hour market and traders can trade the Globex at any time.
Hi Al, I rarely ever see you buy above a doji bar but yesterday you labeled a buy around 10:00. Can you elaborate? Please and thanks
That buy above the doji was a higher low after a wedge so you can expect a second leg up. Poor signal bar but good context.
Is the move down to 3200 unlikely to begin this month now? Or are you still looking for that to start this month? This seems like the strongest bull move I’ve seen since following the market!
There are only 4 days left in August and this is a runaway rally. While it is possible to get a climactic reversal in the final days of any month, at the moment, traders are only buying. So, no, traders will buy any 1 – 2 day pullback in the remaining days of August. The bears will have to wait for September to look for signs of profit taking.