Trading Update: Wednesday February 8, 2023
Emini pre-open market analysis
Emini daily chart
- The Bulls had a strong outside-up day yesterday after testing the January 27th high over the past two trading days. They are likely to step aside and assess bear determination today.
- While yesterday is enough of a surprise bar to lead to a second leg up, it is an outside bar, overlapping the past three trading days.
- This is a warning that the market is forming an early trading range and that the follow-through after yesterday will disappoint the bulls and lead to sideways to down trading.
- The bulls have six consecutive bull bars on the daily chart, which is climactic behavior and increases the odds that today will close below the open of the day.
- The bulls want yesterday’s outside up bar to be a second attempt at a successful breakout above the December 13th high.
- The bulls need today to be another strong bull trend bar closing above yesterday, trapping the bears.
- The problem the bulls have is that the rally over the past six days is climactic, and traders will probably take profits up, and aggressive bears will sell, betting on sideways to down.
- The bears still need to develop more selling pressure before they have a credible chance at a downside breakout. The best the bears can hope for without more selling pressure is sideways.
- The bulls want this rally to continue and form a small pullback bull trend. However, the problem the bulls have is that the rally looks climactic and unsustainable. This increases the odds of sideways trading.
- Overall, traders should assume that the bulls will likely step aside for a couple of days to see what the bears can do. Bulls will become more determined to buy if bears are not eager to sell.
Emini 5-minute chart and what to expect today
- Emini is down 10 points in the overnight Globex session.
- The overnight Globex session has been in a bear channel since the early morning hours.
- Looking at the 15-minute chart, the market is transitioning from a bull channel into a trading range and is currently probing to find the bottom of yesterday’s bull channel.
- The bears want to undo the damage the bulls caused with the strong rally after Powell’s speech.
- Traders should be mindful that the market may try and test back down to the 11:00 AM PT (4,114.5 Price level) to allow the bears out.
- Some bears got trapped, selling a pullback from the strong selloff down to 11: 00 AM. If the market is in a trading range, it will probably test back down to allow these bears out breakeven at first entry, with profit on the scale in.
- There is an 80% chance that these scale-in bears will be able to exit breakeven on the entire trade. This would require a pullback to around the 4,140 price level.
- As I have said several times, the daily chart has six consecutive bull bars, and the odds are against today having a bull close.
- As always, the trader should assume today will go sideways for the first 6-12 bars. This means traders should not be in a rush to trade the first hour unless they are comfortable with limit order trading.
- Most traders should try and catch the opening swing trade, which usually happens before the end of the second hour.
- The swing trade usually happens after forming a wedge top/bottom or a double top/bottom.
- Lastly, traders can also wait for a credible breakout with follow-through, breaking through support/resistance, and enter in the direction of the breakout for a second leg.
Emini intraday market update
- The Emini Gapped down and rallied, testing yesterday’s close.
- The Market went sideways for the first 10 bars and formed a double top with bars 3 and 10.
- The bears got a three-bar selloff down to bar 13 (7:35 AM PT) and went down for a measured move.
- The bears got a downside breakout down to bar 27 (8:45 AM PT), and the market has been going sideways since.
- While the bears have been able to form a small pullback bear trend, it will likely evolve into a trading range and go sideways for the next several hours, and decide on trend resumption or trend reversal later in the day.
Yesterday’s Emini setups
Tim Fairweather created the SP500 Emini chart.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The EURUSD is beginning to stall below the moving average after three consecutive bull trend bars.
- The odds are the small pullback bull trend is converting into a trading range and not a bear trend.
- This means that the market may have a deep pullback before the bears get a second leg down after the recent three-bar bear breakout.
- The market will probably test closer to the January 6th low over the next few weeks.
- The market might have to test the February high before reaching the January 6th high.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Al created the SP500 Emini chart
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.
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.