Trading Update: Wednesday February 22, 2023
Emini pre-open market analysis
Emini daily chart
- Emini bears follow-through needed after downside breakout yesterday, breaking below the February 10th bull flag.
- The market came within 5 points of the 4,000 big round number and will probably have to fall below it today or tomorrow.
- The bulls have a trendline at around 3,985, which will also be a magnet for the bulls. The trendline is from the October 2022 low and January 3rd low.
- The market will probably try to reach the January 19th signal bar high. It was a bad signal bar that trapped bears are selling above. Those bears likely got trapped selling the January 19th high, thinking it was resistance.
- When resistance such as the January 19th high fails, it often becomes support, which means there will likely be buyers at the high of January 19th.
- Another target for the bears is the January 25th bottom of the bull channel.
- The bears have a strong looking breakout today and must demonstrate strength by getting strong follow-through.
- The bulls need to prevent the bears from successfully achieving follow-through. The bulls are hopeful that yesterday was just a sell vacuum test of a 50% pullback from the rally that began in January 2023.
- Overall, traders will pay close attention to the follow-through today. If the follow-through is strongly bearish, it will increase the odds of lower prices and a test of the January 19th signal bar high.
Emini 5-minute chart and what to expect today
- Emini is up 2 points in the overnight Globex session.
- The Globex market has been in a tight bear channel on the 15-minute chart for several days.
- The market has been going sideways in a trading range for most of the overnight session. This will increase the odds of more trading range price action today.
- Traders should assume that today will have a lot of trading range price action until there is a clear breakout with follow-through.
- Most traders should consider not trading the first 6-12 bars since the odds favor a lot of limit order trading on the open.
- Traders looking for a swing trade on the open should wait for a credible double top/bottom or a wedge top/bottom. It is common for the opening swing trade to happen after forming one of the above-mentioned patterns.
- Lastly, a trader can wait for a credible breakout with follow-through and enter for a second leg.
Emini intraday market update
- The Emini rallied on the open and failed to break out of yesterday’s closing range.
- The bears got an opening reversal down that sold off with 6 consecutive bear bars.
- While the selloff down to bar 10 (7:20 AM PT) was strong, it was within an overall trading range.
- The bulls were able to get a strong reversal up on bar 11, which increased the odds of the day is a large trading range and not a bear trend.
- Since the odds favored a trading range, the bulls and bears began buying below bars, scaling in lower, betting that the market would rally back to bar 1 and bar 2 low.
- The rally up to bar 20 (8:10 AM PT) was a strong enough rally to lead to a 2nd leg up.
- At the time of writing (9:00 AM PT), the market has gone sideways for well over 10 bars, and that increases the odds of the 2nd leg from the bar 20 rally likely to lead to disappointment and increase the market continuing to go sideways.
- Overall, traders should assume the upside and the downside will likely be limited, leading to limit order traders continuing to make money.
- the market is in breakout mode and deciding if the bulls will get trend resumption up to the bar 4 close or if the bears will get trend reversal down to the low of the day. Traders should assume that sideways is most likely for the next couple of hours.
- Traders should pay attention to the open of the day and assume the market will try and close near it. This would disappoint the bears after yesterday’s strong bear breakout.
Yesterday’s Emini setups
Al created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The EURUSD had done a good job holding below the moving average for 12 bars which is a sign of strength by the bears.
- The selloff has had a lot of overlap during those 12 bars. However, the channel down is tight, which lowers the probability of bulls buying.
- The market is in the buy zone of the January 5th and 6th high, where bears began to get trapped selling during the rally up to the February high.
- The market is likely in a trading range and will bounce soon. This means traders should expect the bear selloff from the February high to be a possible bear leg in a trading range.
- Even if the market reaches the January 6th low before getting a bounce, the odds will still favor more sideways.
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
- Live stream video trial replacement of end of day review coming soon.
See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.
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.