Trading Update: Monday February 14, 2022
Emini pre-open market analysis
Emini daily chart
- The daily chart tested the February 2 high last week and failed to break above it. The bears want follow-through after February 11 and are hopeful this is a double top lower high, major trend reversal setup that will break below the January lows.
- The odds have favored a test of the January lows soon before a rally up to the January highs.
- February 11 was a strong bear bar, and bears are hopeful this is a give-up bar that will lead to the January lows. The bulls are hopeful that February 11 is a 50% pullback of the rally from the January low, setting up a higher low major trend reversal and rally up to the January highs.
- Last Friday is a surprise bar, and the odds favor at least a small second leg down.
- Today will be important to see what kind of follow-through the bears can achieve after Friday’s big bear trend bar. Since the market has been in a trading range for the past six months, the odds are the bears will be disappointed, and today will be a bull trend bar or a weak bear bar.
- The bulls will be hopeful that February 11 is a second-leg trap that will trap eager bears into a bad short and be followed by a rally up to the all-time high.
- Last Friday, the bears broke below the eight-day trading range and bears hope to achieve a measured move down projecting to around 4300. Next, the bears will want a break below the January lows followed by a measured move down from the February range.
- The market probably only has a 40% chance getting a successful breakout below the January lows.
- However, with the Winter Olympics coming to an end this week, it is possible Russia invades Ukraine, and if that were to happen, that would be enough of a major event to lead to a strong breakout below the January lows.
- Traders should expect continued sideways and confusion on the daily chart.
Emini 5-minute chart and what to expect today
- Emini is down 5 points in the overnight Globex session.
- Traders will expect trading range price action on the open. Traders should wait for a credible stop entry buy or a strong breakout with follow-through.
- Since Friday was a big bear bar in a trading range on the daily chart, traders will pay close attention to today.
- The odds favor a close above the open or at least a weak bear close at a minimum (see daily chart summary for details). This means bulls will look for a credible swing buy early in the day for a possible trend from the open. Bull will also look to buy any selloff, especially a test falling below today’s lows.
- Traders also need to be open to a strong bear trend day, which would be follow-through after last Friday’s bear bar.
- Traders pay close attention to the open of the day, and if the market is not far from it late in the day, they will look to bet on a close around the open of the day.
Yesterday’s Emini setups
Al created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The market sold off last Friday and today reached a 50% retracement of the strong bull breakout ending on February 4.
- Today, the bears want another strong bear bar to raise the probability of lower prices.
- Even if the bears get a second strong bear trend bar today, that would increase the odds of a trading range. This does not mean a high probability of selling off to the January lows. It just means the odds would favor more sideways.
- More likely, today will be disappointing for the bears, confirming that this selloff is likely a pullback from the 5 bar bull breakout and the odds still favor a bull breakout and second leg up that test the October lows.
- Traders can argue that February 10 was the second leg for the bulls, and therefore, the requirement of a second leg has been met. However, bulls will likely need a more credible test before traders expect lower prices.
- The bears have a credible double top with the January and February highs. While it is not likely the bears get a bear breakout below the neckline (January low), if Europe handles the possible Russian invasion of Ukraine poorly, that could be the catalyst for a successful bear breakout and measured move down.
- Overall, today is important to see how convicted both sides are. The bulls have a possible second leg trap, and if they can get a strong bull signal bar today, it may set up a reasonable stop entry buy for tomorrow. That could lead to a test of the February highs.
- The bears have a surprise bar with last Friday’s bear breakout and are hopeful it leads to a small second leg down. More likely, we are in a trading range, which means today will likely be disappointing for both the bulls and the bears.
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 market had a trading range open that led to a 2nd entry short at bar 6.
- Bar 7 was a strong enough surprise to lead to a couple of legs down and a wedge bottom.
- The wedge bottom down to bar 14 was tight, so most traders would wait for a strong bull breakout or a pullback from the breakout, which the bulls got on bar 16 & 20 (double bottom higher low major trend reversal).
- Next, the bulls were able to rally to the high of the day in the form of consecutive wedge tops and a failed breakout above the prior high at bar 5.
- Around bar 47, the bears got a bear breakout that led to a new low of the day.
- The bears were hopeful the bar 47 would lead to a double top and measured move down of the initial range; however, bears bought back shorts below the low of bar 14, and bulls started buying aggressively.
- Overall, trading range day is important to pay attention to the lack of consecutive big trend bars. While bar 53 was a big bear bar breaking below support, it followed consecutive sell climaxes. Also, the follow-through after bar 53 bear breakout was not that impressive and had a lot of overlap.
- On a trading range day, traders will pay attention to the open of the day and look to fade the market and bet on a retracement back to the open of the day.
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 on trading room days. 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.
Thanks Brad and the other guys of the team! I just subscribed, as I am digesting the amazing book trilogy, and just started the course also. Your daily reports are a gem, thanks a lot!
Thanks for the report. Bar 53 was a big bear bar that had broken the initial range and closed far below the low of bar 14. Wondering if at this stage it was right to assume we shall expect a measuring gap that is based from the high of the day to the low of bar 14?