Emini and Forex Trading Update:
Monday February 8, 2021
I will update again at the end of the day.
Pre-Open market analysis
The Emini has rallied strongly from 2 big bear days over the past 2 weeks. It is now at the all-time high, at a measured move target, and it might gap up to a new high again today.
This is a buy climax, similar to the rallies that ended on September 2 and on October 12. It could last several more days before there is a pullback. Once there is a pullback from an extreme buy climax, it often will last several weeks. Those other 2 buy climaxes led to 10% corrections over the next month. However, there is no sign of a top yet. Traders will continue to bet on new highs until there are consecutive big bear days.
Last week broke above the top of a month-long trading range. Additionally, Friday reached the measured move target based on the September/October double bottom. Finally, the Emini is testing the 3,900 Big Round Number. When the Emini reaches obvious targets, many bulls take partial profits. This often results in a few sideways bars. Friday was a small bear bar, and it was sideways on the 5-minute chart. There is an increased chance of more sideways trading today.
Friday is a sell signal bar for an Expanding Triangle top with the January 8 and January 26 highs. That is a type of higher high major trend reversal. With the daily chart being overbought, traders expect a 10% pullback soon. But it only had a small bear body, and it is therefore a weak sell signal bar. Also, there is a 6-day bull micro channel (no pullback for 6 days), which is a sign of eager bulls. Traders will probably buy the 1st 1- or 2-day pullback. However, if the bears get a micro double top this week, traders will be more willing to short.
Can the Emini race up to far above the 4,000 Big Round Number? It probably won’t. It is already overbought, and that is also above the top of the 3-month bull channel. The buy climax can continue a few more days, but probably not much longer before the bulls begin to take some profits.
Overnight Emini Globex trading
The Emini is up 16 points in the Globex session. It might gap up to a new all-time high on the daily and weekly charts. If so, the gap will be small. Small gaps typically close in the 1st hour.
With Friday’s range being small, and with the Emini testing the 3,900 Big Round Number, there is an increased chance that today will trade above Friday’s high and then below Friday’s low. Today would then be an outside down day, and a sell signal bar on the daily chart. But with the 6-day rally as strong as it has been, the Emini will probably have to go sideways, for at least a couple days before it goes down. Therefore, even if today is an outside down day, it will probably not be a big bear day.
The Emini stalled for several days at the 3,700 and 3,800 Big Round Numbers. The Emini broke above 3,900 in the Globex session. There is an increased chance of it stalling here as well. That reduces the chance of a big bull day, despite the strong 6-day rally.
With the Emini unlikely to have a big bear or big bull day, there is an increased chance that today will have a lot of trading range price action.
EURUSD Forex market trading strategies
The EURUSD Forex market on the daily chart formed a big bull bar on Friday, after breaking below a 2-month trading range. It is a buy signal bar for a failed breakout. Friday was strong enough so that the bulls might get a small 2nd leg sideways to up this week.
But is it strong enough to be the end of the 6-week bear trend? Probably not. The bulls will need to break strongly above the bear trend line, and then above the January 22 lower high.
Also, the spike down to the January 11 low could be the start of a Spike and Channel Bear Trend. If so, the channel typically has at least 3 clear legs down. Friday was a credible end of the 2nd, but there should be at least one more leg down.
Additionally, when there is a trend reversal down after a buy climax, the selloff usually reaches the bottom of the buy climax. That is the December 1 low. Consequently, even if the EURUSD goes sideways to up this week, the odds favor at least slightly lower prices.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market triggered the buy signal on the daily chart overnight, by going above Friday’s high. After pulling back, it tried again, and failed a 2nd time to begin a trend up.
However, the reversal down from above yesterday’s high has been weak. The EURUSD has been trading sideways to down in a small range all night. Day traders have only been scalping. But the range has been so small,that it has been difficult to make even a 10-pip scalp..
The day after a big reversal day often is a small trading range day. Traders sometimes need several days to decide if the reversal will begin a trend up, or form a bear flag and lead to a resumption of the bear trend. That is what is happening now, and it could result in a few trading range days this week.
Can today become a big trend day in either direction? With it being in a small trading range in the overnight session, on the day after a big reversal up, it will more likely remain a trading range day. But if there is a series of strong trend bars up or down, day traders will quickly switch to swing trading.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
The Emini gapped up to a new high on the daily and weekly charts. Since the gap was small, traders expected it to close, which it did.
Today was a bear Trending Trading Range Day, but it rallied in the final 2 hours and closed above the 3,900 Big Round Number. The Emini has rallied strongly for 6 days with no sign of a top. However, it went sideways on the daily chart around every Big Round number since 3,500. Traders will expect that again. It could go sideways for a couple days or a couple weeks.
There is room to the top of the bull channel on the daily chart, and that is the next magnet above, just above 3,920. A more important magnet is the 4,000 Big Round Number. But it might be too far to reach before there is a 10% pullback. However, until there are consecutive strong bear days on the daily chart, traders will continue to buy, as they have done since late October.
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 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.