Emini and Forex Trading Update:
Tuesday February 9, 2021
I will update again at the end of the day.
Pre-Open market analysis
The Emini formed another buy climax day on the daily chart yesterday. It was the 6th consecutive day without a pullback. This is now a 7-bar bull micro channel, which means the Emini is extremely overbought. It closed on its high, which often increases the chance of at least slightly higher prices today. However, yesterday ended with a buy climax on the 5-minute chart. A buy climax on the daily chart often ends with a buy climax on the 5-min chart. Also, February tends to be a down month.
With the Emini in a buy climax, there will probably be a 1- to 3-day pullback this week. But, the bull trend has been strong, and traders will buy the pullback. Until there are consecutive big bear days, traders will continue to buy, betting on another new high. This has worked since late October.
The bulls want a breakout above the 4-month bull channel, which is about 10 points above yesterday’s high. But most breakout attempts above bull channels fail. Therefore, the Emini will probably reverse down from above the channel within the next week.
A more important magnet is the 4,000 Big Round Number. Yesterday broke above the 3900 Big Round Number, but spent most of the day going sideways. It stalled at least for a few days at every Big Round Number since 3,500, and that makes it likely to do that again.
Will the Emini break strongly above 4,000 before there is a 10% pullback? With the Emini in a buy climax, like in September and October, there is a 50% chance of a 10% pullback, before a strong break strong above 4,000. But the bull trend has been strong. There could be a small break above 4,000 before there is more than a 3-day pullback.
Overnight Emini Globex trading
Yesterday ended with an extreme buy climax on the 5-minute chart, at a new all-time high with the daily chart in an extreme buy climax. Traders expect at least a small pullback this week. It might start today.
The day after a buy climax day has a 75% chance of at least a couple hours of sideways to down trading that begins by the end of the 2nd hour. Can today be a strong bear trend day? With the strong bull trend in the daily chart, the bears will probably need to stop the buying before they can begin strong selling. Therefore, if today is a bear trend day, it will probably not be a big bear day.
Can today be a big bull trend day? Since yesterday was a likely exhaustive buy climax, there is only a 25% chance of a strong bull trend day today.
So, if today is probably not going to trend strongly up or down, that leaves either a trading range day, or a weak trend in either direction. But if there is a series of strong trend bars in either direction on the open, the odds of a strong trend will increase.
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 reversing up from a 6-week selloff. The rally today broke above the bear channel, and back above the January 18 low. Traders expect a couple legs sideways to up after a 6-week sell climax.
If today closes near its high, traders will expect a couple legs up to the January 22 lower high. A strong break above that high will end the bear channel. The daily chart will be back to neutral, and in the middle of its 3-month trading range.
But if today closes below the bear trend line, traders will expect the 2nd leg to be more sideways than up. Furthermore, they will conclude that the bear trend is probably still intact.
A market often breaks above a channel, but then turns down and makes another new low. This results in a broader channel, which means that the bear trend is still underway. Unless the EURUSD breaks above the January 22 high, the odds still favor lower prices.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market rallied overnight and broke above the bear trend line on the daily chart. However, it pulled back almost 30 pips over the past few hours, to just above that trend line, which is around 1.2080. That is enough to make bears expect a trading range. Day traders will therefore probably start to sell rallies in addition to buying pullbacks.
The key price is the bear trend line on the daily chart. It is the top of the 6-week bear channel. If the bears can get today to close below the line, and below the midpoint of today’s range, traders will view the 3-day rally as a likely bear flag within a bear channel. While there will probably be a 2nd leg up after the sell climax on the daily chart, it might be more sideways than up.
But if the bulls can get today to close on the high of the day and far above the bear trend line, the odds of a test of the January 22 lower high will be more than 50%. Traders will expect the 2nd leg up to be more up than sideways.
Therefore, the daily bear trend line could be a magnet all day. Sometimes a chart will oscillate around a magnet and then decide in the final hour whether to close above or below it. With the trading range trading of the past hour, that process might be beginning.
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 from yesterday’s close and briefly sold off on the open. It reversed up from a sell climax to near yesterday’s high. It then reversed down from a wedge top. The bulls got a reversal back up from a higher low double bottom, and today formed a Broad Bull Channel.
On the daily chart it was another bull day and the 8th day in a bull micro channel. This is a buy climax, but there is no top yet. Also, the 4,000 Big Round Number is an important magnet above. There is a 50% chance of a 10% correction before the Emini gets far about 4,000.
See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.
Trading Room
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 trading room. We offer a 2 day free trial.
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.
Hi Al, did you feel the sell below the bar at 8:30 PST was poor because we were at the bottom of a trading range? I saw the bear micro channel down from the high of the day but hesitated on the sell because of how strong the 8:25 bar was. Your thoughts? thank you.