Trading Update: Tuesday January 17, 2023
Emini pre-open market analysis
Emini daily chart
- The Emini had a strong rally on Friday, closing the week on its high.
- At the moment, the market is always in long, and the first reversal down is likely to fail. However, after four consecutive bull bars, it increases the odds of likely bear close today or tomorrow.
- The bears want the market to stall around the 4,000 big round number and the December 13th sell signal bar low.
- However, with the channel up being tight and the market forming four consecutive bull bars, this increases the odds that the best the bears will be able to get over the next few bars is sideways.
- The bulls want Friday to confirm that the bull breakout above the bear flag (December 22nd and January 9th) will be successful. The market will likely rally to the December 13th high if the bulls succeed.
- The Market may have to reach the bear trendline from January 2021 All-time high and the March 29th high. The market came close to the trendline on December 13th but failed to reach it.
- The bears can argue that the rally from the January high is forming a parabolic wedge; however, the channel up is so tight that the best the bears can probably get is sideways.
- Overall, the bears need to create more selling pressure if they are going to form a lower high below the December 13th low. At a minimum, the bears need to form a micro double top, or the market will likely continue higher and test the December 13th high and the bear trendline.
Emini 5-minute chart and what to expect today
- Emini is down 3 points in the overnight Globex session.
- The Globex market has been going sideways for most of the overnight session.
- Since the market has been going sideways for so many bars (15-minute chart), it is in breakout mode.
- In general, traders should assume that the odds are 50-50% for the upside, or downside breakout and a 50% chance that the market breaks out one way, fails and goes the other way.
- Traders should assume that the market is going from a trading range open during the U.S. Session. This means most traders should consider waiting for 6-12 bars before placing a trade.
- Traders that want higher probability should wait for a clear breakout with follow-through, breakout out of support/resistance. At that point, the odds will be at least 60% of a second leg up, and traders can enter in the direction of the breakout.
- Traders can also consider waiting for a credible stop entry as a double top/bottom or a wedge top/bottom. There is at least an 80% chance on the open that there will be a swing trade beginning before the end of the second hour from one of the patterns mentioned above.
- The most important thing on the open is to be ready for anything and assume most breakouts will fail.
Emini intraday market update
- The Emini opened at Friday’s close and reversed up above Friday’s high.
- The bears were able to form a parabolic wedge bottom around bar 12 and were able to get a strong reversal down, testing the low of bar 3.
- The bears want a breakout below the bar 3 test of the 4,000 big round number.
- Next, the bears want a measured move down from the opening range.
- While the market is Always In short from the bar 12-15 bear breakout, the day has had a lot of trading range price action. This increases the odds of a deep pullback before the bears are able to get a second leg down.
- I am typing this at 7:50 AM PT, and at the moment, the odds favor a new low of the day. The bears are concerned that today is a trading range, and the pullback from the bar 15 (7:45 AM PT) breakout may be deep.
- Overall, the high of the day is likely in place. This means traders will be more willing to sell and scale in higher betting on a second leg down.
Friday’s Emini setups
Al created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The EURUSD is forming an expanding triangle (blue lines) and is trying hard to stay above the January 2nd high.
- While the market is Always In Long, and the bulls have a 7-bar micro channel, the market is likely forming a trading range. This means that the upside is likely limited, and the best the bulls will get is sideways.
- The bears need to develop more selling pressure before they are eager to sell up here. If the bears can make the market go sideways and form bear bars closing on their lows, the market will probably get back down to the January 5th high, which was a bad buy signal bar.
- Overall, the rally from the October 2022 low is the first trendline break of the 2021 bear channel on the weekly chart. This increases the odds that the market will have to pull back to at least 300 pips before the bulls have a credible higher low major trend reversal.
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 was a reversal down from a buy climax that led to a trading range day.
- The bulls got an upside breakout that led to a wedge top.
- The bears got a major bear surprise and a downside breakout that led to a new day’s low.
- The market formed a parabolic wedge bottom around 8:30 AM PT, and the market rallied for the next two hours.
- With all of the buying pressure on the open, the odds were that the downside would be limited and that traders
- Overall, with the selloff down to 8:30 AM PT being as tight as it was, it increased the odds that the day would either be a trading range or a bear trend day.
- This meant that bears would be willing to sell above bars and scale in higher, confident that the market would go sideways. The bulls were confident that the downside was limited due to all of the strong buying pressure on the open. This means that bulls would buy below bars and scale in lower.
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.