Posted 7:04 a.m.
The Emini opened within Friday’s tight trading range and began with more tight trading range price action. Swing traders are waiting for a strong breakout with follow-through up or down. The Emini broke above Friday’s all-time high by 1 tick and immediately pulled back.
This has been a limit order open and it increases the chances that today will continue the trading range price action of Friday. It also increases the chances that any swing up or down will probably not get very far before entering a trading range. Day traders need a strong breakout with follow-through to end this price action. Until they get it, they will be quick to take profits and mostly scalp. The absence of consecutive strong trend bars increases the chances that any move up or down is simply a leg in a trading range instead of the beginning of a trend.
At the moment, the Emini is Always In Long, but in a weak rally. It has not had a close below the moving average in 30 bars, which is good for the bulls. The bulls need a strong breakout soon. Without it, the bulls will take profits and wait to buy lower, and the bears will begin to sell below bars, betting on a swing down from a failed breakout above yesterday’s high.
My thoughts before the open: How to trade futures when a breakout is weak
The Emini broke to a new all-time high last week, but the breakout was with a small doji bar on the daily chart. This is not how strong breakouts typically look. While it is possible that the ascending triangle of the past 4 months simply bends up and becomes a bull channel, it is more likely that either one side or the other gives up and the Emini forms either a bull breakout or a reversal down.
Until then, the price action trading strategy is to expect mostly trading range trading, with the swings each day not going very far. However, this will probably change soon because the tight trading range on the daily chart has lasted about 100 bars, which is already unusually long. The odds that there will be a breakout are increasing with every bar that gets added to the candlestick pattern.
The rally last week was the 2nd push up from the May 6 bottom of the current rally. Trading ranges often only have 2 legs up and down. However, the 2 legs so far are strong enough to get one more push up before a pullback. If the Emini gets that one more push, then there would be a wedge top, and this would probably be followed by a couple of legs down on the 60 minute chart.
The bulls had a chance at creating a gap up on the weekly chart today, and it still might happen, but the Globex session currently lacks momentum and is trading about 4 points below Friday’s high. This is disappointing for the bulls. Disappointment is a hallmark of a trading range, and this increases the chances of trading range trading today.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini had a trend from the open bull trend that ended up as a spike and channel bull trend that closed at a new all-time high.
The bar on the daily chart was a bull candlestick and it was a continuation of the breakout above the 4 month trading range. Although the Emini pulled back after the wedge channel, today was a small pullback bull trend day and a trading range is more likely than a bear trend tomorrow. The bulls want more follow-through buying, and they might get it, but after a climactic wedge top today, the Emini will probably have at least a couple of hours of sideways to down trading that will probably start within the 1st hour. Because today’s rally was a small pullback bull trend, there was very little selling pressure. This makes a bear trend tomorrow unlikely until after the bears generate more selling pressure. Once they do, they might be able to create a credible top, like a major trend reversal.
The 60 minute chart has had 12 bars without a bear body. This is occurring late in a 60 minute rally. It is therefore more likely an exhaustion gap than a measuring gap, and it means that the odds favor at least a 60 minute tight trading range tomorrow instead of a strong bull trend from the open.
Best Forex trading strategies: Dollar oversold
Traders learning how to trade the markets are faced with an interesting daily chart of the EURUSD. May has had 3 pushes up and is testing the February Final Flag, but this 3rd push up is especially strong. This increases the chances that it is a breakout above the low 2 of the 1st half of the month, and it reduces the chances that it is a month long wedge top.
However, the odds are that May will be a small trading range. It is at the same price level as the February triangle, and there have been a lot of reversals on the 60 minute chart. The 60 minute rally looks like it is strong enough to have another new high, but it could begin channeling down to the 1.1065 bottom of the May channel at any time. Reversals are coming quicker and the best Forex trading strategy for beginner wanting to trade Forex for a living is to take what the EURUSD is giving and not expect too much yet. The market needs a strong bear breakout before daytraders will look for big swings. Until then, daytrading will be mostly Forex scalping.
The USDCAD has a wedge bottom on the daily chart, but the pattern is relatively flat. The market is trying to bounce for a couple of legs up. The bears do not mind a bounce as long as they can then create a breakout below the wedge, which would probably lead to 2 legs down. It is currently more likely that the bulls will get 2 legs up.
See the weekly update for a discussion of the price action on the weekly candlestick 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, and a 2 day free trial is available.
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.
Dear All,
Have closed comments thread to avoid wasteful diversions from topic.
Will move Barge and Al’s commentary to a more suitable place later.
Thanks for your understanding.
BTC Admin
Al,
I would first like to say thank you for the knowledge you have imparted to the community. With that said and in no way I want to disrespect, I was wondering if you would be willing to disclose your trading performance for the past 10 years ?
The reason I am asking is because there are so many so called/self proclaimed “experts” selling stuff however when one asks them for results/performance you would hear all sorts of excuses, reasons or at times plain b** *crap.
I am confident you are not one of those and willing to shut up the critics,forums who question your style.
Thanks again.
I totally understand your thoughts, but there is an important legal reason why pros do not disclose their performance…the NFA does not allow it without subjecting the trader to a comprehensive compliance audit. That is why you see that NFA disclaimer everywhere.
Since I take thousands of trades a year in many accounts and I am in my 60s, I have no interest in spending my remaining days trying to satisfy some young watchdog who is trying to make a name for himself by landing a big fish.
I am well aware of NFA rules and regulations, don’t think what you mentioned is a reason not to.
Anyways let me clarify maybe I wasn’t clear enough. Lets make this easy – how about a brief summary of returns for the last 5 years which you can easily get from your brokerage firm ? I see you are on tradestation so it shouldn’t be difficult to generate that report.
I aint no watchdog Al, the reason I am asking is because I want couple of folks from my firm to learn your style of trading as I definitely see potential with PA.
If I really wanted to go after big fish, I would rather go after one of those multi billion dollar funds, sorry AL.. The only reason for me posting is plain and simple, money, nothing more nothing less.
I have had this discussion with my attorney a few times, and he has been very clear. He said that there is no upside, and only a downside if I start to go down that path because there is an implicit promise that someone buying the course could duplicate whatever I claim.
If you watch CNBC, they have many professional traders on every day. Each one of them knows that viewers would like to know how well they trade, but you never hear any of them talk about it. I have traded with many successful daytraders over the years, and none of us has ever talked with one another about how well we were doing. I never asked any of them why they never talk about their track records, but I personally enjoy my privacy, and I assume they enjoy theirs as well.
However, I can speak in general terms. Many professional traders think in terms of a day’s range. For example, a scalper’s goal might be to make about a day’s range. If today’s range in the Emini was about 10 points, he would expect to make about 10 points by the end of the day. If someone swings more and scalps less, he might expect to make about half of a day’s range on an average day. If someone traded very aggressively all day long, he might expect to make about 1.5 times a day’s range.
It’s a shame that people always bother Al up to the point of feeling the need to view every single activity on his bank account. Learning to trade is a journey and whether or not you know about Al’s performance is THE most unimportant thing, because it distracts you from your own trading. You simply need to look at the intraday market updates by the time Al publishes them, to see how precise and clear his understanding of the markets is. If you studied harder and put the focus more onto yourself, your own confidence grows and you just don’t feel that need anymore. Best wishes.
Hi Al,
You mentioned that the odds are that this “top” on the EURUSD (Friday’s test of the Feb H at 1.146, the two LLs since then on the hourly chart) will most likely result in a TR.
Do you mean that the market will likely F to get below Friday’s H (as it appears to be doing now, 8am PST) then just go sideways? Or that we will get all the way down to the bottom of the channel at 1.1065 and that will then be the bottom of the range, with Feb’s H as the top?
As always we appreciate your valuable insights in the currency markets!
Angus
With trading ranges, tops and bottoms are never clear. Traders simply decide that the upside and downside are not great. Many traders buy low and sell high, using wide stops, allowing for the possibility that they did not pick the exact turning point. The 6 min wedge top has a double top for the 3rd leg up, and the 60 min chart has been in a TR for about a week. This means that the direction is not clear. As I said, the 3rd leg up was unusually big and that lowers the probability that the wedge top will lead to 2 legs down. This increases the chances of more sideways while the market decides between needing one more push up and simply pulling back now.
I think the trading range price action since late April means that the current rally is a bull leg in what will be a trading range. This means that I think it will test down to the bottom of the range around 1.1080, but it might continue higher first.