Trading Update: Monday January 23, 2023
Emini pre-open market analysis
Emini daily chart
- The Emini is testing the 4,000 big round number and is trying to get a second leg up from the January 17th rally. Bulls want test of 4000.
- Last Friday was a strong bull breakout, testing close to 4,000. The bulls want to trap the bears and lead to an upside breakout.
- Some bears sold the breakout down to December 20th. Regardless of whether they scaled in higher, they were likely sufficiently disappointed by the rally up to January 17th. This means those bears will probably try and exit breakeven between their original entry and their scale-in entry, likely around the January 19th close.
- The bulls had a strong breakout bar yesterday and need a strong follow-through bar today. If they can get a strong follow-through bar today, that will increase the odds of higher prices and a second leg up to the December 13th high.
- The bears want last Friday to be a test of the January 17 high. Next, they want the rally to fail and form a double top with the January 17 high, leading to a test of the December 2022 low.
- Overall, traders will pay close attention to today’s close. The bulls want today to have a strong follow-through bar. The bears want to trap the bulls and create a strong close today. Last Friday’s bull breakout is likely strong enough that the odds favor a second leg up, which will likely limit the downside over the next few bars.
Emini 5-minute chart and what to expect today
- Emini is up 5 points in the overnight Globex session.
- The Globex market has been going sideways since yesterday’s open. The bulls recently got an upside breakout above Friday’s high; however, the breakout looks weak now.
- With all of the trading range trading over the past twelve hours, it increases the odds of more sideways.
- As always, traders should assume the open will have a lot of trading range trading on the open. Traders should use caution over the first 6-12 bars and consider waiting.
- Breakouts on the open are generally lower probability, meaning they have a higher rate of failure. In general, 50% of the time, the first initial breakout will completely reverse, no matter how strong. Strong breakouts can often reverse after a few bars, so a trader trading the open, needs to be quick to make decisions.
- Traders can also wait for a swing trade in the form of a double top/bottom or a wedge top/bottom. It is common (80% chance) that the market will have a swing trade within the first two hours of the day. The swing trade will often come from one of the patterns mentioned above.
- Lastly, traders should be mindful of the open of the day. If the open is in the middle of the range around bar 40, traders should assume the day will likely continue to have a lot of trading range trading.
- As Al Brooks often says, “Price is Truth,” which means traders must use the chart as their single source of truth. A trader cannot be in denial based on what they think will happen. If they are wrong, they must accept it as quickly as possible and find a way to get in the right direction.
- Lastly, below is a great Ask Al Brooks Video on trading psychology worth watching.
Emini intraday market update
- The Emini formed a bull trend form the open that began on bar 1.
- I am writing this at 8:30 AM PT (Bar 24), and the market is currently Always In Long. However, the rally is becoming climactic.
- Most trends from the open bull trends form a trading range 60% of the time. This means that the odds favor the market soon evolving into a trading range.
- The market is currently trying to test the 8:05 AM PT (bar 19) low.
- One can argue that the market formed a parabolic wedge, with the 8:05 low being the start of the final leg up.
- The market has been away from the moving average since the middle of last Friday’s Day-only chart (Globex not included).
- Overall, traders should expect the upside to be limited over the next several hours, and the market evolves into a trading range and begins to go sideways.
- If the bears are going to reverse the bull trend, the market will likely have to go sideways for several bars and develop more selling pressure. Until then, sideways to down testing the moving average is the best the bears can hope for.
Friday’s Emini setups
Al created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The bulls got a small second leg up from the January 12th bull breakout and found sellers at the January 18th high.
- While the market may continue higher in a small pullback bull trend, more likely, the market is evolving into a trading range.
- The bears will see today’s rally as a failed breakout of the expanding triangle, and they hope for a second entry short with a bear signal bar closing on its low.
- The bears still need to create more selling pressure. Otherwise, the best we can likely hope for is sideways.
- Overall, traders will pay attention to see how today looks. The bears want a strong bear close today. Next, the bears will want a strong follow-through bar tomorrow to increase the odds of lower prices and a selloff back into the December trading range.
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
- Today formed a small pullback bull trend from the open that later formed a trading range.
- When you get a small pullback trend, there is typically a 60% chance the market will form a trading range during the day, so traders expected the rally up to 8:15 AM PT to soon lead to sideways trading.
- For the first 24 bars, the market was always in long and in the tight bull channel. This meant there was no reason to buy, as indicated on Al’s chart.
- The bulls got a decent trendline break to the moving average around 9:00 AM PT. This increased the odds that any rally would likely begin to stall and go sideways.
- The market formed a higher high major trend reversal around 11:15 and sold off for an hour, and the market bounced into the close.
- Overall, today was a follow-through for the bulls. However, the tail on top of the bar will disappoint the bulls, which is expected in a trading range.
- The past two days are strong enough to increase the odds of another leg up. The bears want to create a strong bear trend bar tomorrow and trap the bulls buying above the January 17th high.
- If tomorrow is a strong bear trend day, it would create a possible wedge top with January 9th, January 17th, and January 23rd.
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.