Trading Update: Wednesday January 19, 2022
Emini pre-open market analysis
Emini daily chart
- Emini breakout below bull trend line yesterday on daily and weekly charts.
- It also closed below last week’s low, and it is testing 100-day MA.
- Bears want reversal down from January 4 wedge top (September 2, November 22, January 4) to continue down to below December 3 low and October 4 low. Their probability will go up if today is a 2nd day closing below last week’s low.
- Friday was a big bull day. Today opened near Friday’s open and sold off. All of Friday’s bulls are now trapped. That should lead to at least slightly lower prices.
- Although the Emini has fallen below the January 10 low, it has not fallen below the more important December 3 low. If it does in January, there will be a 2nd consecutive OO top on the monthly chart. The bears would then have a 60% chance of a couple more months of lower prices. If the bulls are still in control, they will prevent that.
- If January is a bear bar on the monthly chart, the more it closes near its low, the more likely the Emini will be sideways to down for another month or two.
- They want January to be an outside down bar on the monthly chart. Since December was an outside up month, there would then be consecutive outside bars.
- That is an OO Breakout Mode pattern. A break below its low would probably lead to a measured move down to the October low. It could reach the April 2021 gap on the monthly chart just below 4,000 within a couple months. That would be about a 20% correction.
- Bulls want January to be a bull bar on the monthly chart. While there is still plenty of time remaining in January, the odds currently favor a bear bar.
- Bulls hope the selloff is just a test of the low of last week, the bottom of the bull channel, the 100-day MA, and the 20-week EMA. They will need a strong bull day today or tomorrow to prevent a test of the December low.
Emini 5-minute chart and what to expect today
- Emini is up 17 points in the overnight Globex session.
- Since the Emini is oversold on the daily chart and in a 2-month trading range, there is an increased chance of a reversal up today from a failed breakout below the January 10 minor higher low.
- Can the Emini form another big bear trend day today? Probably not, but if it does, that would increase the chance that the January 4 wedge top was the start of a 2- to 3-month correction.
- Today therefore will more likely be sideways to up, and it might be a bull trend day. Traders should look for a possible bull trend from the open or a selloff and a reversal up.
Yesterday’s Emini setups
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- Yesterday was a Bear Surprise bar and the 3rd consecutive bear bar. The breakout above the bear trend line and the 2-month tight trading range might be failing.
- The bears want a break below the December 15 low at the bottom of the 2-month trading range and then a measured move down to below the June 19, 2020 low.
- They hope that yesterday is a resumption of the 2021 bear trend and that the selloff continues to below the bottom of the 7-year trading range. If they get a 2nd strong bear bar today, traders will expect a break below the 2-month trading range.
- If today is a bull bar closing near its high, the bulls will hope that it is a higher low in a new Small Pullback Bull Trend.
- If today is not a strong bull or bear bar, the EURUSD might begin to go sideways again in its 2-month trading range.
- If there is a break below the 2-month tight trading range, that range will more likely be the Final Bear Flag instead of a bear flag in a move down to last year’s low. That means there probably will be a reversal back up within a few weeks.
- The odds favor a rally for a couple months before a break below the 7-year low because the monthly chart is in a trading range and legs in a trading range do not typically go straight down from the top to the bottom.
- Traders are deciding if the rally has begun or if there will be one more leg down before it begins.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
- The Emini gapped up to just below the open of the week, but sold off in a Bear Trend From The open.
- It reversed up from a wedge bottom and a High 2 bottom from just below yesterday’s low.
- After a rally that tested the open, it sold off again to below yesterday’s low.
- It collapsed in the final hour to just above the December 20 higher low. It formed an iii pattern at the end of the day. That is a Breakout Mode pattern on the 5-minute chart.
- The bears hope that the Emini gaps down tomorrow below that December 20 low and forms a big bear trend day.
- The bulls hope that the selloff will reverse up from a double bottom with that low.
- Remember, as strong as the January selloff has been, the Emini is still in a 3-month trading range.
- In a trading range, reversals are more common than successful breakouts. Consequently, the Emini will probably bounce, at least for a few days, from around the current level or the December 3 bottom of the range.
- The momentum down on the daily chart is strong enough for traders to expect a break at least a little below the December 20 higher low.
- An interesting possibility that January trades below the December 3 low, which is the December low. January would then be an outside down month after an outside up month in December.
- That is an OO (consecutive outside bars) Breakout Mode pattern, but with January probably finishing with a bear body, a bear breakout would be more likely.
- This would be the 2nd OO pattern in the past 5 months. If January is outside down and February goes below its low, that would trigger the OO sell signal and the micro wedge top sell signal on the monthly chart.
- The Emini would then probably sell off for about a measured move down, based on the height of the OO (which is simply January’s range).
- That should result in a test of the October 4 major higher low, the 20-month EMA, and the 200-day MA.
- The selloff might reach the April 2021 gap above the March 2021 high on the monthly chart (and daily chart). That is just below 4000 and almost a 20% correction.
- While I have been saying that the Emini would probably test the October low at some point in the 1st half of the year and maybe the 1st quarter, I have also said that I thought that a 20% correction to below that monthly gap is probably the worst case for 2022 and that the Emini probably would rally later in the year.
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.
After a good spike like today how many bars should a healthy pullback have if it’s gone be a spike and channel? Thank you.
I mentioned that the entire selloff in January might be a sell vacuum test of the bottom of the 3-month trading range. When there is a big bar late in a trend, it is more likely to be exhaustive than the start of a new trend. Therefore, there should be a bounce for at least a day or two, and possibly back to the middle of the 3-month range.