Emini has 1st 5-day pullback since October

Emini and Forex Trading Update:
Tuesday February 23, 2021

I will update again at the end of the day.

Pre-Open market analysis

The Emini pulled back again yesterday. While yesterday was a bull doji, which is not bearish, it was the 5th day down from the all-time high. This is the 1st 5-day pullback since October, which is a sign that the bulls are more persistently taking profits. The market is becoming less bullish.

Today is the longest selloff since November. This selloff could be the start of an Endless Pullback. Charts have 2 variables, price and time. All bear trends need lower prices. Sometimes, early in a trend, time is more important than price. If the bears can control the market for enough days, even if there are no big bear days, it increases the chance that the bulls will give up. If they do, their panic selling will create a couple big bear days. At that point, traders will conclude that a 10% correction is underway.

Overnight Emini Globex trading

The Emini is down 23 points in the Globex session. It will probably gap below yesterday’s low. If the bears can keep the gap open, traders will wonder if it will be a measuring gap. A measured move down would be a test of the big gap below the February 2 low at 3,800.

The bigger the gap today, the more likely today will be a trend day. If there is a trend, down is slightly more likely when there is a big gap.

The Emini has been sideways for 11 days. Most of the days have been relatively small, and have had at least one swing up and one swing down. If today begins with a trading range, today will probably be like most days. But if there is a series of trend bars in the 1st hour in either direction, there will be an increased chance of a big trend day today.

Yesterday’s setups

Here are several reasonable stop entry setups from yesterday. I show each buy entry with a green rectangle and each sell entry with a red rectangle. Buyers of both the Brooks Trading Course and Encyclopedia of Chart Patterns have access to a much more detailed explanation of the swing trades for each day (see Online Course/BTC Daily Setups).

My goal with these charts is to present an Always In perspective. If a trader was trying to be Always In or nearly Always In a position all day, and he was not currently in the market, these entries would be logical times for him to enter.

If the risk is too big for your account, you should wait for trades with less risk or trade an alternative market like the Micro Emini.

EURUSD Forex market trading strategies

The EURUSD Forex market on the daily chart has been in a trading range since mid-January. Some computers will see it as a triangle, while others will see a head and shoulders bottom bull flag. This is a Breakout Mode pattern. That means that the odds of a bull breakout are about the same as for a bear breakout. They shift a little each day, but until there is a breakout, it is basically 50-50.

The bears today are trying to get a reversal down from the top of the range. If today has a bear body, it will be a sell signal bar. If they can break strongly below the February 5 low, the selloff should reach the November low of 1.16. But the rally is strong on the weekly chart. Traders will buy the selloff, and there should be a 2nd leg up to 1.25 at the top of the 6-year trading range.

The bulls want a breakout above the January 21 high, which is the neckline of the head and shoulders bottom bull flag. They then want a break above the January high. But even if they succeed, there will probably be sellers above, because there would be a new wedge at the top of a 6-year trading range.

Everyone knows that there will eventually be a successful breakout but most legs up and down within a trading range reverse. Traders will continue to take quick profits until there are consecutive closes above or below the range.

Overnight EURUSD Forex trading

The 5-minute chart of the EURUSD Forex market rallied for a few hours to above the February 16 high, but then reversed down from below the January 22 high at the top of the triangle. The reversal down has been strong enough so that the bulls will probably not get a bull trend.

However, the bears do not need more than what they already have. They simply want a bear bar on the daily chart, so that traders will look for lower prices tomorrow. Therefore, there is not a strong incentive for the bear trend to continue a lot lower today. Also, after 3 bull days, the bears will probably not be able to get a big bear day.

So if today will probably not go up or down much, what is left? Sideways. Today will probably convert into a trading range and then traders will fight over the close. The bears want the day to close on the low, which would increase the chance of lower prices tomorrow.

The bulls prefer a close above the open, but would be satisfied with a close in the middle third, even if there is a bear body. That would reduce the chance of a big bear day tomorrow. The bulls would then try again to break above the January 22 high late this week.

Summary of today’s S&P Emini futures price action and what to expect tomorrow

Here are several reasonable stop entry setups for today. I show each buy entry with a green rectangle and each sell entry with a red rectangle. Buyers of both the Brooks Trading Course and Encyclopedia of Chart Patterns have access to a much more detailed explanation of the swing trades for each day (see Online Course/BTC Daily Setups).

My goal with these charts is to present an Always In perspective. If a trader was trying to be Always In or nearly Always In a position all day, and he was not currently in the market, these entries would be logical times for him to enter.

If the risk is too big for your account, you should wait for trades with less risk or trade an alternative market like the Micro Emini.

End of day summary

The Emini gapped down and collapsed on the open, but it reversed up strongly from the sell climax. The reversal was from just above the big gap below the February 2 low and from the bull trendline that began with the October 30 low. Today closed near the high, and it is a High 2 buy signal bar on the daily chart.

Can the bull trend resume from today’s reversal up? If tomorrow is a strong bull day, the rally will probably continue to above 4,000.

But the 6-day bear channel is tight, and the February 2 gap and 50-day MA are magnets just below. Also, today was the 6th day in the pullback. This is the longest time for a pullback since the 10% corrections in September and October. However, until the bears create consecutive big bear bars, the odds at least slightly favor higher prices.

See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.

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Charts use Pacific Standard Time

When I mention time, it is USA Pacific Standard Time (the Emini day session opens at 6:30 am PST, and closes at 1:15 pm PST). You can read background information on the intraday market reports on the Market Update page.

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