Emini and Forex Trading Update:
Monday July 8, 2019
I will update again at the end of the day.
Pre-Open market analysis
The Emini closed at a new all-time high on the weekly chart last week. While it finally broke above my minimum target of 3000, it failed to close above it. On the daily chart, the rally from the June 12 low is in a tight bull channel and it has 3 legs. It is therefore a parabolic wedge buy climax.
But, the past 3 days had bull bodies. Traders want to see a bear bar and a micro double top before looking for a test down. Also, Friday closed above its midpoint. It is therefore a buy signal bar for today. But, it has a tail on top. That makes it a weak buy setup. Many bulls will take some profits above its high.
Also, the rally has stalled at the 3,000 Big Round Number. As a result, the bears will begin to sell with limit orders above the high of the prior bar. This, combined with some profit-taking by the bulls increases the chance of trading range trading for at least a couple days.
Can a parabolic wedge on the daily chart begin a bear trend? It often does, but when it does, The Emini typically goes sideways to down for 10 or more bars 1st. An abrupt reversal down would be rare. Consequently, the downside risk on the daily chart is small for at least a week or two.
Overnight Emini Globex trading
The Emini is down 7 points in the Globex session. Friday’s gap down and selloff was a Big Down move. The rally was a Big Up move. That creates Big Confusion and makes traders hesitate to bet on a big trend.
Instead, they expect the bulls to take profits on rallies and buy selloffs. Also, they know the odds favor bears selling rallies and taking profits around support. The result of both the bulls and bears buying low, selling high, and betting against big trends is usually a trading range.
Finally, I have mentioned several times over the past 2 weeks that there is a seasonally bullish tendency between June 26 and July 5. That window is now over. That further reduces the chance of a strong rally this week.
EURUSD Forex market trading strategies
The EURUSD daily Forex chart sold off again on Friday. The bears hope that their yearlong bear trend is resuming. They see the 6 week rally as a double top with the March 20 high.
However, the bulls have been making higher lows and highs for 6 weeks. The chart has been in a trading range for 5 months. The bears need a break below the May 23 52 week low to convince traders that the bear trend is still intact. Without that, traders will bet that the 2 week selloff is just a bear leg in the 5 month trading range.
The bears will look to take profits at support, like the June 18 major higher low. Also, the bulls see that the selloff is now in the bottom half of the range. They therefore will be more willing to buy. But, since the selloff is now close to the support of the June 18 major higher low, many bulls will wait to buy closer to that low. Many also prefer to buy with stop orders after a strong reversal up.
Since that 1.1181 low is important and nearby, this selloff probably will continue a little lower. If there is a strong break below, traders will expect a new 52 week low. At the moment, the selloff will probably reverse up from above the May 23 low.
Overnight EURUSD Forex trading
The 5 minute chart has been in 25 pip range overnight. In addition, today not break below Friday’s low, despite Friday’s strong selloff. Today so far is an inside day. That is bad follow-through after a bear breakout.
If today closes above its open, it will have a bull body on the daily chart. It would therefore be a buy signal bar for tomorrow.
The daily chart sold off for 2 weeks in a tight bear channel. Since that channel has had 3 legs, it is a parabolic wedge sell climax. That increases the chance that the selling will end this week around the June 18 low.
Day traders expect a trading range after a parabolic wedge sell climax down to support on the daily chart. That would be a Breakout Mode pattern.
Because of higher highs and lows for 6 weeks, the bulls will look for a reversal up at some point this week. However, sideways is more likely for at least a couple days. Consequently, day traders will be looking for 10 pip scalps today.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
The Emini gapped down and entered a tight trading range. The bears have an expanding triangle top on the weekly chart, but no sell signal bar. They also have a parabolic wedge top on the daily chart. They probably will need a micro double top.
Traders see the 3 day tight trading range as a Breakout Mode pattern. But, even if the bears get a reversal down to the June 26 start of the parabolic wedge, the Emini would probably enter a trading range on the daily chart. The odds favor a test of the top of the expanding triangle within a month.
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 Intraday Market Update page.