Emini and Forex Trading Update:
Friday July 31, 2020
I will update again at the end of the day.
Pre-Open market analysis
The Emini sold off yesterday, but reversed up strongly from just above last week’s low and into the February gap. Because it was a bull bar and the Emini is in a bull trend on the daily chart, tomorrow is a High 1 bull flag buy signal bar.
However, the Emini has been sideways for 2 weeks. Traders are still deciding if the 4 month rally will continue up to a new high or if the Emini will first pull back to the middle of the 3 year trading range.
Today is the final day of the week and of the month. The bulls want July to close above the June high and in the February gap. Both will be magnets in the final hour today.
Will today be a big trend day? Most days have a lot of trading range price action. Furthermore, the Emini is near 2 important magnets. Also, the Emini is in the middle of a 2 week trading range. These factors reduce the chance of a big trend day today. The Emini will probably stay within 20 points of either the June high or the February gap, and then test one of the magnets in the final hour.
However, yesterday was particularly strong. The Emini could easily continue up to a new July high and close the month on the high. That would be a close far above the June high and make higher prices likely in August.
Overnight Emini Globex trading
The Emini is up 8 points in the Globex session. While the bears want the month to close below the June high, that is about 40 points lower. Furthermore, it is below the support of the EMA on 60 minute chart. Consequently, July will probably close above the June high.
For day traders, while yesterday was strong, it was also sideways for 4 hours. That trading range is a magnet. Also, the bulls are confident that they will accomplish their goal of having July close above June. And, they are exhausted from yesterday’s big reversal up. These factors reduce the chance of a big bull day.
So traders are not expecting a big rally or a big selloff. That means today will probably spend a lot of time going sideways. But even if that is true, the legs up and down should be big enough for day traders to swing trade.
EURUSD Forex market trading strategies
The EURUSD Forex market on the daily chart is having its strongest rally in 8 years on the weekly chart (not shown). On the daily chart above, the rally is extreme. There was a parabolic wedge last week, but this week broke above the wedge.
However, the bear bar on Tuesday might be a 1 day Final Bull Flag. There is also a potential higher high double top with the September 2018 high. Also, this is the 3rd leg up from the March low so there is a big wedge bull channel.
Because the rally is extreme and climactic, the bulls should take profits soon for a couple weeks. That should result in a couple legs small sideways to down for about 200 pips to near the EMA. The minor reversal down might even test the March high.
It is important to note that traders now see the daily and weekly charts as in bull trends. They will buy the pullback. The selloff should become a bull flag and not a bear trend.
Overnight EURUSD Forex trading
The 5 minute chart of the EURUSD Forex market rallied to another 52 week high last night but reversed all of the way back down to the open and to yesterday’s close. Today so far is a reversal day. That is a sign that the bulls are beginning to take profits and the bears are starting to sell.
Yesterday reversed Wednesday’s rally, but traders bought the reversal and yesterday closed on its high. Will they do that again today? It is more likely that the bulls will not buy aggressively now that there is a 2nd reversal attempt in a market that is likely on the verge of pulling back. Day traders today looking to buy will be scalping.
Will the bears continue the overnight bear trend? There is no need. As long as today closes around the open, today will be a reversal bar on the daily chart. Since traders expect a profit taking pullback to begin within the next few days, this is all that the bears need. They would like today to close below the open, but they do not need a big bear day. Besides, the bulls probably will not allow it.
Traders believe that today isn’t going up or down much. It will therefore probably be a trading range. It could be the start of a 2 week profit taking pullback.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
Today opened above yesterday’s high and sold off to test the June high and the open of the week. It then rallied back above the February 24 high at the bottom of the weekly gap. It closed near the high of the month, well above the June high. This increases the chance for 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.
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.