Trading Update: Tuesday January 10, 2023
Emini pre-open market analysis
Emini daily chart
- The Emini sold off yesterday, creating disappointment following last Friday’s outside up bar.
- Follow-through wanted by bears today, increasing the odds that last Friday was a second leg trap for the bulls.
- The bulls reached the December 6th breakout point, and the market found resistance.
- Traders bought around the December 6th low and got trapped during the December 15th selloff. Many of those traders would scale in lower and were disappointed enough that they exited their longs back at their original entry (December 6th low).
- The bears see the two-day pullback as a rally testing resistance (December 6th low). Next, the bears want a second leg down from the December 13th selloff.
- When you have a trading range, it is common for the selloff to go below the breakout point before the bears get their second leg down.
- The bears want the past two trading days to be a second-leg trap. While the bears have a good signal bar, traders will wonder if last Friday’s breakout is strong enough for a second leg up.
- The bears are hopeful yesterday will trap the eager bulls into buying too high and that the market will sell off to the low of last Friday at a minimum.
- it is reasonable for bulls to exit, and many may have gotten out early before yesterday’s close, anticipating a gap down.
- Overall, traders will pay close attention to the follow-through today. if the bears can get a strong entry bar, it will increase the odds of a second leg down from the December 13th selloff.
Emini 5-minute chart and what to expect today
- Emini is down 2 points in the overnight Globex session.
- The Globex market went sideways in a tight trading range for the majority of the overnight session.
- The bears got a downside breakout around 3:15 AM PT. The bears are hopeful this breakout will lead to a second leg down and follow-through from yesterday’s selling. But the 6.00am PT report with Fed Chair Powell speaking has resulted in a rally back into overnight range.
- More likely, today will disappoint the bears and add to the confusion of the daily chart.
- With yesterday’s late climactic selling, traders should expect at least two hours of sideways trading today.
- Since yesterday’s late selloff was climactic, there is typically a 75% chance of two hours of sideways trading beginning before the end of the second hour.
- As I often say, most traders should consider waiting for 6-12 bars before trading. This will help prevent a trader from getting trapped on the wrong side of a failed breakout since most breakouts fail on the open.
- Traders can also wait for a credible stop entry in the form of a double top/bottom or a wedge top/bottom.
Emini intraday market update
- The market formed a big bull bar on bar 1. However, it failed to get follow-through, which increased the odds of sideways trading.
- Because of bar 1, the odds are that the day will form a bull trend or a trading range day.
- The market went below bar 1, formed a double bottom with bar 5, and rallied to a new high of the day at 7:20 AM PT.
- The bears got a strong selloff to a new low of the day at 7:50 AM PT. This was a strong enough selloff to increase the odds of a bear trend or TR.
- At the time of writing this 8:00 AM PT, the market has three consecutive bull bars and is testing the 7:20 AM PT bear signal bar. There will likely be sellers around the 7:20 low, and the market will begin to go sideways.
- The market is forming a large triangle, which is trading range price action. Traders should expect a trading range to last for some time.
- As Al often says: “until there is a breakout, there is no breakout.” The market is getting many breakouts within the overall trading range. Until there is a clear breakout and follow-through closing far above the day’s extreme, the market will likely remain in a trading range day.
- Traders need to be cautious about buying after a second leg up at the top of the range and about selling a second leg down at the bottom.
Yesterday’s Emini setups (Delayed: Chart will be posted Mid-Afternoon on Jan 11th)
Brad created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The bulls got a strong entry bar following last Friday’s strong outside up bar.
- Bulls want an upside breakout above the January high; however, even if they get it, the odds favor sellers not far above.
- The daily chart has been in a bull channel since the November 21st low and is likely evolving into a trading range.
- On the higher time frame charts like the weekly chart, the rally from October is a strong reversal up from the tight bear channel that began back in early 2021.
- This reversal up on the weekly chart is still probably a minor reversal up, which means the bulls will probably need a higher lower to get a major trend reversal and a second leg up.
- This means that the EURUSD could easily sell off 300 pips before the bulls get a higher low major trend reversal setup.
- Overall, traders should expect mostly sideways trading over the next few weeks.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Brad created the SP500 Emini charts.
End of day review
- The market went sideways for the first two hours and transitioned into a small pullback bull trend for the rest of the day.
- Bar 1 was a big bull bar; however, the follow-through was bad, which increased the odds of trading range price action and sideways. Also, the context of the bar was bad. Yesterday was a tight bear channel, so the odds favored a trading range open.
- Bar 1 was big enough to increase the odds of the day is either a bull trend or a Trading range day, though, and lowers the probability of a bear trend.
- The bulls got a double bottom on bar 5; however, it is following a four-bar microchannel and forcing traders to buy at the top of a trading range. Also, the bull that bought the 1 close is trapped, and they may use the bar 5 exit around breakeven.
- The market formed a second leg trap at 9:15 AM PT and sold off to a new low of the day.
- The bulls formed a Lower Low Major Trend Reversal. However, following a 7-bar bear microchannel increased the odds of the reversal up being minor.
- The market formed a deep pullback and a Higher Low Major Trend Reversal and formed a small pullback bull trend into the close.
- Overall, today was a good day for the bulls. The bulls managed to revere yesterday’s bear bar, and not the bulls need to get a follow-through tomorrow.
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.