Emini bears breaking below January low

Trading Update: Thursday February 24, 2022

Emini pre-open market analysis

Emini daily chart

• The Emini has been in a tight bear channel since February 9 and bears breaking below the January low during the overnight session.
• As stated many times on the reports, the odds favored the market falling below the January low before going above the January high.
• While the odds favored the market selling off below the January low, Russia invading Ukraine was the catalyst that helped speed up the market getting to its target.
• The next target for the bears is the 4000 big round number. It is only 115 points away, so it is certainly within reach. While the market may have to bounce first, 4000 is an obvious support level, and the market will probably have to reach it.
• If 4000 is an obvious magnet, we may get a sell vacuum to that target because bulls may not be willing to buy if they are confident they can buy lower at 4000. Bears will sell aggressively, knowing that traders will not buy until it gets to 4000.
• Currently, the market has had a 14% correction, and it will probably fall to somewhere between a 15-20% correction. There is also the April 2021 gap on the higher time frames around the 3950 area, and the market may test into that gap.
• The bulls see that that market is close to support levels and below the January lows, so they will look to buy. The bulls buying here are value traders/investors buying because the market is down 14%, and they will be thrilled to buy more if the market falls to 20%.
• Overall, the channel down from February 9 is tight, and the first reversal up will probably fail. The bulls will probably need a double bottom or micro double bottom before buying for a swing up. They are prepared to add on lower and possibly hold for a long time.

Emini 5-minute chart and what to expect today

• Emini is down 100 points in the overnight Globex session.
• The Globex has been in a trading range for the past 8 hours, following a strong selloff after the close of the previous U.S. Session.
• The bulls are hopeful this sideways price action over the past 8 hours is enough buying pressure to lead to a major trend reversal up and a rally during the U.S. Session today.
• At this point, the bears will probably be exhausted, and today will probably be a bull close, which would disappoint bears.
• While the bears are likely to be disappointed, it does not mean today will be a strong bull trend day.
• Since today will have a big gap down, traders should expect a rally to test the moving average. The market could reach the moving average by going sideways, so traders will be open to a trading range and limit order market for a couple of hours.
• Swing traders will wait for a credible stop entry setup like consecutive trend bars, double bottom, or wedge bottom. At the moving average, bears will look for a double top or wedge top.
• While the odds favor a bull trend day since today would be the 5th bear bar on the daily chart, it is possible today is a bear trend day. Traders need to be open to the possibility of sideways for several hours and the market getting a bear breakout late in the day, creating a bear bar on the daily chart.  

Yesterday’s Emini setups

Al created the SP500 Emini charts.

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. These therefore are swing entries.

It is important to understand that most swing setups do not lead to swing trades. As soon as traders are disappointed, many exit. Those who exit prefer to get out with a small profit (scalp), but often have to exit with a small loss.

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

EURUSD Forex daily chart

• The bulls gave up early, a couple of hours after the prior U.S. Session. This is likely due to the news of Russia invading Ukraine.
• The current bar on the day session is a surprise, which means traders will expect a second leg down, which will probably fall below the January low.
• The bears are hopeful that they can get a measured move down from the November – February trading range to get the market close to the 2020 lows. While this is possible, it is unlikely after all of the buying pressure the market has had over the past 2 months.
• This is an attempt at trend resumption down; however, it is more likely to lead to another reversal attempt, just like the bear breakout on January 27 led to a reversal up.
• The bears need today’s bar to close on or near its low. Next, the bears need strong follow-through. Otherwise, traders will begin to buy aggressively as they did on January 31 after January 28 was a doji (a bad follow-through bar for the bears).
• The bulls expect today’s bear bar to lead to a failed breakout and a test back to the February 3 bull breakout.
• Next, the bulls will expect a bull breakout of the February high and a measured move up to the October 2021 high, followed by a test of the September 2021 high.
• Overall, traders will pay close attention to how today closes, along with the follow-through over the next few trading days.
• I want to point out a good example of an endless pullback that happened here:
  • The bulls got a strong 4-bar rally on February 3. However, notice the market took 5 trading days to go above the January high, and it only went 12 pips above that.
  • That is a red flag for traders and a big sign of disappointment for the bulls (it means most bulls were more interesting in selling out of longs than buying more at new highs).
  • Next, the bulls tried to form a credible stop entry buy on February 15, following 2 consecutive bear bars.
  • The bulls tried on February 22 to form a double bottom higher low; however, it was in a 6-bar tight trading range, which lowers the odds for the bulls, which is why February 22 closed as a doji.
  • The point is that when you get a pullback after a strong-looking breakout in a trading range, the Always In direction does not usually change until it is low in the range, such as today. It traps traders into holding onto a long position, and by the time it has reversed, the market is close to the bottom of the range.

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

• The bulls got a sharp reversal up after a big gap down.
• During the first hour, the bulls got a wedge top at the moving average.
• The bears tried to get a reversal down at the moving average, but it ended up going sideways for the next two hours.
• The bears tried for a higher high major trend reversal at bar 53, but the bears failed, and the market led to trend resumption.
• Bulls ended up getting a trend resumption in the form of a major surprise bar at bar 52 that led to a small pullback bull trend for the rest of the day.
• Overall, this is a strong signal bar on the daily chart for the bulls and increases the odds of this, leading to a reversal up on the higher time frames.

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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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 on trading room days. We offer a 2 day free trial.

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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.

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