Trading Update: Thursday January 20, 2022
Emini pre-open market analysis
Emini daily chart
- Emini is testing the 100-day moving average and broke below the daily and weekly trendline. The Emini bears need follow-through.
- December low is so close we will probably have to reach it to satisfy a test.
- The bears still see the wedge top on the daily chart (September 2, November 22, and December 28) and expect the price to reach the December low and the October lows of 2021.
- The bears had a strong breakout yesterday and want follow-through today to convince traders that the market will reach October lows during this selloff. More likely, we are in a Trading Range, and traders will expect the bears to be disappointed today and likely not get the follow-through the bears want.
- As stated many times by Al, the daily chart has likely been in a trading range since July of last year.
- Bulls are hoping this is just a vacuum test of support: December 2021 lows and the 100-day moving average. The bulls need a strong bull day to convince traders that the market will not reach the December low on this test. Even if the bulls achieve that goal, the market will still likely test the December low even if we go to a new all-time high first sometime this year.
Emini 5-minute chart and what to expect today
- Emini is up 25 points in the overnight Globex session.
- Bulls want to get as big a bull bar as possible during today’s session to disappoint the bears on the daily chart.
- Yesterday had consecutive sell climaxes going into the close, so odds are we will enter a trading range today for a couple of hours.
- The bears see the Globex price action as a deep pullback from yesterday and are hoping for trend reversal down sometime today and achieving the goal of bear follow-through today.
- Bulls see a high low major trend reversal with the trading range price action early this morning and hope the market reverses up into a strong bull day today.
- There will likely be something wrong with both the bulls and the bears today. For example, we may get a bull close that closes around its midpoint, which would be bad follow-through for the bears, and a weak signal bar for the bulls.
Yesterday’s Emini setups
Al created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The bears were able to close far below the December 31 breakout point. This is terrible follow-through for the bulls after the January 12 bull breakout.
- Bears see the past three consecutive bear bars as a failed breakout of the two-month trading range and expect a breakout below.
- Bulls see the three consecutive bear bars on the daily chart as a test of the bear trend lows and expect a major trend reversal and a rally up to the November and September 2021 highs.
- While yesterday’s big bear bar is bad for the bulls, even if we fall to the lows of the two-month trading range, the odds will still favor a reversal up and a failed breakout below the two-month trading range.
- While the bears hope we get a climactic reversal (bull breakout followed by a bear reversal down), most simply lead to more trading range price action, which is what is most likely over the next couple of days.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
- Today began with a bull trend from the open. The rally stopped with a parabolic wedge at the 60-minute EMA.
- It went sideways for 20 bars, but it formed lower highs, which means it was in a bear channel. Thee was a double top lower high major trend reversal.
- It then broke below the trading range and formed a Small Pullback Bear Trend.
- It crashed around 11 am PT to below the December low.
- January is now an outside down month after December was an outside up month. January has become an OO sell signal bar on the monthly chart.
- If February trades below January, which is likely at the moment, it would trigger the monthly OO sell signal and the micro wedge sell signal.
- The Emini should then fall to the October low and possibly to the gap above the March 2021 high on the monthly chart, which is below the 4,000 Big Round Number. That would be about a 20% correction, and it is my worst case for the year.
- That December low is the bottom of the 3-month trading range. The bulls want a failed breakout and a reversal up.
- But with the selloff on the daily chart as strong as it has been, the bulls will likely need at least a micro double bottom before they can get more than a 3-day reversal. The Emini should trade lower.
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 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.
The buy the close open also was a leg 1, leg 2 measured move. There was a lot of resistance at the top of that second leg.
Good job on trading update. Thanks.
Today the VIX futures lost almost all of their bullish contango and ended on the cusp of shifting into bearish backwardation.