Emini Bears Want Test of 4,000

Trading Update: Friday February 10, 2023

Emini pre-open market analysis

Emini daily chart

• The market gapped up yesterday and then sold off below the February 7^th outside up bar. Emini bears want test of 4,000.
• The rally up from January 19^th has had consecutive buy climaxes and formed a parabolic wedge top, with February 2^nd as the top of the wedge.
• Yesterday was enough of a surprise bear breakout to increase the odds of a second leg down and a test of the January 30^th high which is the bottom of the third leg up in the wedge top.
• The 4,000 big round number is also close enough to the bottom of the last leg up in the wedge that the market will probably have to reach the round number.
• If the bulls are going to prevent a test down to 4,000 and the January 30^th low, they will need to disappoint the bears sufficiently. If the bulls can get a strong reversal bar today, that might be enough to entice bears to exit shorts due to the risk of a failed 2^nd leg down from the February 2^nd high.
• Overall, today will be an important bar. The bears need to get a strong follow-through bar, and the bulls need to prevent any bear follow-through. More likely, today will be confusing and disappoint both the bulls and the bears, making the market more uncertain. Currently, the odds favor a test of 4,000 and the January 30^th low.

Emini 5-minute chart and what to expect today

• Emini is down 20 points in the overnight Globex session.
• The overnight Globex market went sideways for several hours and broke out to the downside in the early morning hours.
• The bears hope the selloff that began in the early morning hours is the start of the trend resumption down.
• The bulls hope that the selloff will lead to a final flag. They want a strong reversal back into the trading range that began late last night around the 4,090 price level.
• As always, traders should expect a lot of trading range price action on the open and consider not trading the first 6-12 bars unless they are comfortable with limit order trading.
• Most traders should consider waiting to stop entry swing trade after forming a double top/bottom or a wedge top/bottom. 
• There is an 80% chance that an opening swing will begin before the end of the 2nd hour and usually begins after forming one of the abovementioned patterns.
• Today is Friday, so weekly support and resistance are important. Currently, the market is 45 points below this week’s open. The bulls will want to close the week above the open of the week, and the bears want to keep the market below it. This makes the open of the week an obvious magnet going into today’s close. Since today is Friday, there is the added risk of a strong surprise breakout late in the day, so traders should be prepared for this.

Emini intraday market update

• The market gapped down and went sideways for the first 7 bars of the day.
• The bulls were able to form a wedge bottom with bars (1,3,7) with strong bull bars closing above their midpoints.
• This increased the odds of limited downside and an attempt at two legs up.
•  The bulls got a strong breakout that ended at 7: AM PT (Bar 11).
• The market formed a deep pullback from the rally that ended around 8:00 AM (bar 18). This pullback was damaging for the bulls and increases the odds of that market entering breakout mode.
• As of 8:45 AM PT (bar27), the market is in breakout mode and will likely break out of the 18-bar range either up or down. The odds slightly favor the upside, but not by much.

Yesterday’s Emini setups

Al created the SP500 Emini charts.

Here are several reasonable stop entry setups from yesterday. I show each buy entry with a green rectangle and each sell entry with a red rectangle. Buyers of both the Brooks Trading Course and Encyclopedia of Chart Patterns have access to a much more detailed explanation of the swing trades for each day (see Online Course/BTC Daily Setups).

My goal with these charts is to present an Always In perspective. If a trader was trying to be Always In or nearly Always In a position all day, and he was not currently in the market, these entries would be logical times for him to enter. These therefore are swing entries.

It is important to understand that most swing setups do not lead to swing trades. As soon as traders are disappointed, many exit. Those who exit prefer to get out with a small profit (scalp), but often have to exit with a small loss.

If the risk is too big for your account, you should wait for trades with less risk or trade an alternative market like the Micro Emini.

EURUSD Forex market trading strategies

EURUSD Forex daily chart

• The bears are trying to get a second leg down after the recent strong three-bar bear breakout to below the moving average (blue line).
• While the odds favor a 2^nd leg down, today is likely not the start of the 2^nd leg down and will probably lead to profit taking.
• The market will probably have to rally and form a major lower high before the bears can form a major trend reversal, and before the bears can get a credible 2^nd leg down.
• The rally is strong enough that the market is likely transitioning into a trading range more than a strong bear trend. This means traders should expect the bears to be disappointed with the rally. However, the bears will expect a 2^nd leg down after the formation of a lower high major trend reversal.
• It is a low probability that the bears will be able to get a strong second leg down without the low-high major trend reversal.

Summary of today’s S&P Emini futures price action and what to expect tomorrow

Tim Fairweather created the SP500 Emini chart from Al’s provided summary

End of day review

• Today gapped down and went sideways for the rest of the day, indicating a trading range was to follow for the rest of the day.
• The bulls had a strong rally up to bar 12. However, it failed to break out above a late lower high from yesterday, and the market sold off, testing the bottom of the breakout (bar 7) low during bar 34 (9:20 AM PT).
• The bulls got a reversal up and a test of above the 18-bar range at (11 high) during 10:25 AM PT (bar 47) and continued sideways for the rest of the day.
• Overall, today was a trading range day, and buying low, selling high, and scalp is important.
• In general, traders should look to sell wedge tops and double tops near the high of the range and look to buy wedge bottoms and double bottoms near the low of the range.

See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.

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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.

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