Trading Update: Tuesday February 15, 2022
Emini pre-open market analysis
Emini daily chart
- Emini bulls higher low major trend reversal wanted. The daily chart tested the February 2 high last week and failed to break above it.
- The bears want follow-through after February 11 and are hopeful this is a double top lower high, major trend reversal setup that will break below the January lows.
- February 11 was a strong bear bar, and bears are hopeful this is a give-up bar that will lead to the January lows. The bulls are hopeful that February 11 is a 50% pullback of the rally from the January low, setting up a higher low major trend reversal and rally up to the January high.
- The market had a doji close yesterday, which is a bad follow-through for the bears. Yesterday was also a bad buy signal bar for the bulls. This makes me think that the market will continue sideways.
- So far, the Emini is up about 70 points and has triggered the buy signal above yesterday for the higher low major trend reversal and second entry buy with February 8.
- Currently (assuming today closes as a strong bull bar), February 11 may be an exhaustion bar and 2nd leg trap, trapping bears into selling too low.
- The bull needs to get a strong bull close today and strong follow-through to convince traders that the market is going above the February high and possibly the all-time high.
- The bears see the overnight rally as a 50% retracement of the selloff from last week.
- While the bulls have a higher low major trend reversal, most major trend reversals are minor and go sideways. As I stated above, if this is going to be a successful higher low major trend reversal, the bulls need to show signs of strength.
Emini 5-minute chart and what to expect today
- Emini is up 45 points in the overnight Globex session.
- The bulls got a strong breakout during the European session.
- The market has been in a weak channel converting into a trading range.
- Today’s Globex rally is strong enough that traders will likely buy any selloff on the open and bet against bear breakouts.
- Since today is likely to gap up, traders may wait for a pullback to the moving average before committing to swing trade.
- Traders should be open to a limit order market on the open and look for either a strong breakout with follow-through, a credible bottom (wedge bottom of double bottom), or a credible top (wedge top or double top).
- Today’s less likely outcome is a trend from the open up or down.
Yesterday’s Emini setups
Al created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The market sold off last Friday and today reached a 50% retracement of the strong bull breakout ending on February 4.
- While the bears got a bear bar yesterday, the bar had a fairly big tail.
- Today’s open only went five pips below yesterday’s close, which means traders were eager to buy when yesterday’s bar closed as a weak bear bar near support (50% retracement of the rally).
- The bulls want to create a 2nd entry buy signal bar close on its high today.
- The bull breakout ending on February 4 was strong enough that the odds favor the market will get a second leg above the February highs.
- The bears have two decent bear bars from the past two trading days, which increases the chances of sellers above.
- The bulls need to get a strong bull bar today to convince traders that last Friday is a 2nd leg trap, trapping bears into a bad short.
- The bulls want a breakout above the January high and a measured move up of the bull breakout that projects to around 1.1740. Next, the bulls would want a measured move of the bull breakout of the double top (January low to January high projecting up). That target projects up to around 1.1840.
- The bears have a credible double top with the January and February highs. While it is not likely the bears get a bear breakout below the neckline (January low), if Europe handles the possible Russian invasion of Ukraine poorly, that could be the catalyst for a successful bear breakout and measured move down.
- Overall, today will be important to see how determined the bulls are to get a second entry buy closing on its high. While today’s bar looks like a strong buy signal bar, the U.S session has not started yet, which means that bears have a long time to make today as weak as possible. This means the bears will try and make today close around its midpoint and possibly far below it.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Al created the SP500 Emini charts.
End of day summary
- Bar 1 had bad follow-through, which was a sign of trading range price action today. The bulls were disappointed by bar 3 and started giving up, leading to outside down on bar 4.
- By the close of the first hour, the market had a move up, followed by a move down, so traders expected a trading range to continue.
- It is important not to be too eager on a day like today. The market often gets strong bull bars at the top and strong bear bars at the bottom, and they can quickly trap traders into a bad trade. It will often be always in long at the top and only have a small second leg up before it reverses. The opposite happens when you get a strong bear bar at the bottom.
- Traders will also pay attention to the open of the day and will bet on retracements back to the open, especially late in the day.
- Another thing to notice is how every strong bull/bear close had bad follow-through. This is another sign of trading range price action.
- Overall, today is a trading range day, so it is important to avoid trading in the middle of the day’s range and look to bet on failed breakouts in the top half and the bottom half 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.
Traders can see the end of the day bar-by-bar price action report by signing up for free at BrooksPriceAction.com. I talk about the detailed S&P Emini futures price action real-time throughout the day in the BrooksPriceAction.com on trading room days. We offer a 2 day free trial.
Charts use Pacific Time
When I mention time, 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.