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.