Trading Update: Friday February 3, 2023
Emini pre-open market analysis
Emini daily chart
- The Emini broke above the December 13th high on Wednesday’s FOMC report, and they were able to get the follow-through yesterday.
- The bulls have 3 consecutive bull trend bars on the daily chart. This is a strong enough breakout to have a second leg up, which means the first reversal down will likely be minor.
- The next target for the bulls is the August 16th high.
- The bulls will see the breakout of the December 13th high as the neckline of a double bottom with the December 2022 low. All double tops and bottoms are trading range attempts, so traders will look for a measured move up of the range where there is a successful breakout.
- The bears want the recent three-bar bull breakout to become a second leg up in a trading range. The bears will likely need some micro double top at a minimum before traders are eager to sell.
- While this may be a second leg trap, it is breaking out of important resistance, the December 13th high, and the bulls were able to get follow-through after the breakout.
- Some traders will argue that the bulls only have one close above the December 13th high; therefore, the bulls will probably need a second bull close above it to convince traders that the breakout will be successful.
- If the bulls need one more bar, bears may get a bear reversal bar that completely reverses yesterday’s bar, which would increase the odds of more trading range price action.
- Traders will pay attention to any retest of the December 13th high. The bulls know there are trapped bears who sold the December 13th high. These bulls want to force the bears to buy back shorts for a loss. The bears will try their best to exit shorts back at the December 13th high and a minimum breakeven on the trade.
- Overall, traders will pay close attention to today and see how strong the bulls are. While the recent bull breakout is strong, the past nine out of eleven bars are bull bars, which is climactic and increase the odds of going sideways for a few bars. If the market goes sideways for a couple of days, bulls will want to prevent the market from falling below the December 13th high.
Emini 5-minute chart and what to expect today
- Emini is down 30+ points in the overnight Globex session.
- The Globex market has gone sideways for most of the overnight session.
- The bears recently got a bear breakout during the 5:30 AM PT report. Looking at a 15–minute chart, the bear breakout (7:45 AM PT) is strong enough for at least a small second leg down.
- The market may test down to the 4,112-price level, which is the close of the February 2nd, 11:45 AM PT, outside up breakout bar (Fed Report Breakout).
- A measured move down of Today’s 5:45 AM PT (15-minute chart) would take the market below the Fed Report Breakout mentioned above.
- With all of the buying pressure over the past few days, the market is likely to have a couple of days sideways to down.
- This means traders should expect a close below the open today or Monday.
- As always, traders should expect a lot of trading range trading on the open and be cautious about betting on a successful breakout. Traders can also consider waiting for 6-12 bars before placing a trade.
- Traders should consider looking for a swing trade during the opening session. There is an 80% chance of a swing beginning before the end of the second hour, and it usually comes from a double top/bottom or a wedge top/bottom.
Emini intraday market update
- The market gapped down on the open and rallied on the first 4 bars of the day.
- The gap down was large enough to increase the odds of a second leg down. However, the first 4 bars of the day increased the chances of the day being a trading range day and was likely to limit the downside during the selloff to 7:05 AM PT (bar 7).
- The bulls got a strong second leg up to 7:45 AM PT. While the rally up to 7:45 AM was strong, it had a lot of overlap, increasing the odds of the bulls becoming disappointed soon.
- At the time of writing this (8:21 AM PT), the market has formed a double top at 8:20 (bar 22) and is trying to get a breakout below the neckline of bar 18 (8:00).
- The odds are that the downside breakout will be limited and lead to a trading range.
- The market will likely go above the bar 15 high of the day and breakout above the 18-bar range.
- Since the odds are that the low of the day is already in, traders will buy pullback and scale in low.
- Since the market formed a bull trend from the open, there is a 60% chance the market will form a trading range for several hours.
- The market will probably enter a trading range for a couple of hours and decide on trend resumption or trend reversal going into the day’s final hours.
Yesterday’s Emini setups
Al created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The bears got follow-through yesterday in the form of a bear bar closing on its low.
- This morning is a follow-through after yesterday’s bear reversal bar, and the market is testing the moving average.
- The market reversed sharply from the 1.1000 Big Round Number.
- It was reasonable for bulls to exit below yesterday’s bear reversal bar, especially because of how extended this channel is. Also, the odds favor a couple of legs down and a test of the moving average.
- Most bulls want to buy lower and after a couple of legs down.
- At a minimum, the market will probably get below the January 31st higher low. The reason is that February 1st was likely exhaustion, therefor the market will likely test below it.
- Overall, traders should expect at least a couple of legs sideways to down.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Al created the SP500 Emini charts.
End of day review
- I will update at the end of the day.
See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.
Al Brooks and other presenters talk about the detailed Emini price action real-time each day in the BrooksPriceAction.com trading room days. We offer a 2 day free trial.
Charts use Pacific Time
When times are mentioned, it is USA Pacific Time. The Emini day session charts begin at 6:30 am PT and end at 1:15 pm PT which is 15 minutes after the NYSE closes. You can read background information on the market reports on the Market Update page.