Emini and Forex Trading Update:
Monday March 1, 2021
I will update again at the end of the day.
Pre-Open market analysis
Friday was the last day of February. It closed below the middle of the month, which is slightly bearish because of the parabolic wedge on the monthly chart – a bear follow-through day. On the weekly chart, it was the 2nd consecutive bear bar, which increases the chance of lower prices this week.
Most importantly, the daily chart on Friday did something that it has not done since October. Friday was the day after a big bear day, and it had a bear body. Every other big bear day for 4 months was followed by a bull day, and soon by a new all-time high.
The bear body confirmed Thursday’s big selloff. A confirmed selloff has better than a 50% chance of at least slightly lower prices. That increases the chance that a 10% correction is underway. However, the Emini could go sideways for several days before it continues down.
With it up 40 points in the Globex session, today will open around Friday’s open, and Friday was a big bear day. This is important. When there is a big bear day and the next day opens at the open and high of the bear day, there is an increased chance of a big bull trend day. When that happens, they often begin strong bull trends. Look at March 24, 2020 on the daily chart.
A big bull day today could make the daily chart neutral once again, but without that, traders should expect lower prices over the next couple weeks. The bulls need consecutive bull days to flip the odds back in favor of a new high before there is a 10% pullback.
Overnight Emini Globex trading
The Emini is up 40 points in the Globex session. It will probably open around the 3,850 Big Round Number and Friday’s close. While the bulls are hoping that today will be a big bull day, and a resumption of the yearlong bull trend, they will probably need a series of strong bull bars in the 1st hour. If they get it, day traders will have a better chance of a bull trend day. But if there is a trading range open, day traders will assume that the bulls will fail. Today will probably then be mostly sideways.
Can today be a big bear day? Probably not with it opening near Friday’s high. If the bears were strong, they would have had today open near Friday’s low.
EURUSD Forex market trading strategies
The EURUSD Forex market on the daily chart has been sideways for 2 months. A trading range constantly forms new buy and sell setups, but most fail. Until there are consecutive closes above or below the range, traders will continue to bet on reversals.
The bulls formed a head and shoulders bottom last week. After breaking above the neckline, the EURUSD reversed down and is testing the bottom of the right shoulder. The bulls now want a double bottom for the right shoulder.
The bears see last week’s reversal as a lower high major trend reversal, and a failed breakout below the neckline of the head and shoulders bottom. They want today to fall at least a couple pips below the February 17 right shoulder. That would increase the chance of a test of the February 5 bottom of the trading range.
It is important that last week was a sell signal bar on the weekly chart. Today triggered the weekly sell signal by going below last week’s low. While the EURUSD has been sideways for 2 months, there is a clear wedge top. The odds slightly favor a bear breakout, and a test of the November low of 1.16 over the next couple months.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market sold off sharply overnight, but it stopped 1 pip above the February 17 low. It has been sideways in a 20-pip range for the past 2 hours. The bears are hoping that this is a bear flag, and want trend resumption down. If today falls far below that low, especially if today closes on its low and far below that low, traders will look for a break below the February 5 low.
Because the biggest bounce has only been 20 pips, day traders cannot make money yet buying with stops. The should wait for a reversal up from the bottom of the range, or for a strong break above the range.
However, with the range being so tight for 3 hours, bear day traders are not making money either.
When a range is tight like this, it is difficult to make 10 pips with stop entries. Most traders should wait for a small bear reversal bar near the top, to sell or for a small bull reversal up from the bottom to buy. Or, wait for a clear breakout in either direction.
Because the EURUSD is at a critical price, and in a trading range on the daily chart, there normally would be an increased chance of a reversal up. But with the earlier selloff as strong as it was, the bulls will have a difficult time getting a big reversal today.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
Today opened near Friday’s close and rallied. The bulls hope last week was a bear trap, but they need another bull day tomorrow to confirm the reversal up. The bears will try to get a double top with last week’s high.
Today made the Emini neutral again. Traders need more information. A strong bull day tomorrow will make traders expect a test of 4,000 this month. But a strong bear day tomorrow will make traders see today as just a pullback from last week’s 2 big bear days.
The Emini has been in a trading range for a month. Traders are looking for reversals every few days. Today tested the 3900 Big Round Number again, like the majority of days since early February. In fact, today pulled back into the close to finish just 2 ticks below that 3,900 magnet.
What should traders expect tomorrow? Because the Emini is in a trading range on the daily chart, traders expect disappointing follow-through up and down. Also, the day after a big buy climax day like today has a 75% chance of at least a couple hours of sideways to down trading starting by the end of the 2nd hour.
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.