Trading Update: Tuesday February 7, 2023
Emini pre-open market analysis
Emini daily chart
- The Emini gapped down yesterday and closed as a doji bar. This is a sign of confusion and hesitation, increasing the odds of a small second leg down after the recent three-bar micro channel down.
- The bulls see yesterday as a high 1 buy signal; however, with it being a doji buy signal bar, that will increase the odds of sellers above and a small second leg down.
- The past three days are likely a sell vacuum test of the January 27th breakout point high.
- The bulls have five consecutive bull days in a row on the day-only session. While yesterday almost closed as a bear bar (close below open), it did not. This will increase the odds that today is a bear bar, preventing the bulls from getting a 6th consecutive bull close on the daily chart
- So far, the breakout above the December 13th high is disappointing for the bulls betting on a successful breakout.
- Yesterday closed below the December 13th high, a sign that the breakout up to the February high will likely lead to exhaustion. Traders should be aware of a likely test of the January 30th low.
- If the bears can get more signs of selling pressure, the market will also test the 4,000 big round number. The 4,000 round number has been a magnet for over seven months and will likely continue to be one.
- Overall, while the bears have done a good job getting the market to close below the December 13th high, they need to demonstrate more bearish strength before traders can be convinced that the bulls are failing.
Emini 5-minute chart and what to expect today
- Emini is down 10 points in the overnight Globex session.
- The Globex market has been in a trading range for most of the overnight session.
- The market is currently testing the 12:15 AM PT low and may find buyers back at this price level.
- As always, traders should expect a lot of trading range price action today. Most traders should consider waiting for 6-12 bars before placing a trade unless they are comfortable with limit order trading.
- Most traders should try and catch a swing trade on the open. There is an 80% chance of a swing lasting at least 10-20 bars and two legs, beginning before the end of the second hour.
- The swing trade often happens after a double top/bottom or a wedge bottom/top form. This means traders can often wait for a stop entry trade after one of the patterns mentioned above forms.
- Traders can often wait for a credible, strong breakout with follow-through and enter betting on a second leg.
- Traders should pay close attention to the open of the day. The daily chart has five consecutive bull closes, and the odds are against a sixth. This means that the odds favor a close below the open of the day today.
- Traders will look for fade breakouts above the open of the day, especially if they look like a leg in a trading range and have 2-3 legs.
- It is possible the market has a rally lasting a few hours and gets a downside breakout below the open of the day (similar to February 3rd) later in the day.
Emini intraday market update
- The Emini had a small gap down and went sideways for the first 18 bars of the day.
- The bulls formed strong buying pressure during the first 3 bars of the day, likely limiting the potential of a bear trend day.
- The market formed a wedge bottom at 7:30 AM PT (bar 12). The bulls had a possible low of the day. However, the buy signal bar on bar 13 was not ideal.
- The bulls got a surprise bull breakout on bar 20 (9:10 AM PT), making the market Always In Long, therefor traders would expect at least a small second leg up.
- With all of the trading range price action during the first 18 bars of the day, that will increase the odds of the bulls becoming disappointed soon and the market going sideways for several hours.
- The bar 20 bull breakout is strong; however, the breakout bar is climactic, which will increase the odds of sideways trading and profit-taking soon.
- Climactic behavior is not sustainable, therefor the rally from the bar 8:00 AM PT low will likely not last all day and will begin to go sideways soon.
- The low of the day is likely to set. The bears need to develop more signs of selling pressure before they have a credible chance at a downside breakout.
- While it Is low probability, traders should be mindful of a possible bear breakout back to the open of the day to end the five-day bull streak on the daily chart. However, at the moment, this is a low probability, and if it is going to happen, there will be clear signs. The bears need to demonstrate strength (writing during 8:50 AM PT) before most traders will become convinced of the possibility of a bear breakout.
Yesterday’s Emini setups
Al created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The EURUSD has three consecutive bear bars in a row, and yesterday closed below the open of the day.
- The argument of a small pullback bull trend is likely over for the bulls. This means the market is either in a bear trend or a trading range.
- I have been saying for some time that the EURUSD needs to pull back and test the January 6th area. This is because the October 2022 rally is the first major trendline break of the bear trend on the weekly chart that began back in mid-2021.
- While the rally since October 2022 is strong, it only has a 30% chance of leading to an endless pullback without forming a pullback and a higher low major trend reversal. This means traders should expect a test of the 1.0500 price level before bulls will be eager to buy.
- Traders should assume the recent three-bar bear breakout will be strong enough for a second leg down, which means the first reversal up will be minor.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Tim Fairweather 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.