Trading Update: Friday February 18, 2022
Emini pre-open market analysis
Emini daily chart
- Yesterday was a strong bear trend bar reversing back to the February 14 low.
- The odds are today will be a disappointing bar for the bears, reminding traders that the market is still in a trading range.
- The Emini bulls want rally from a double bottom higher low major trend reversal and hope that the market gets back to the January high.
- The bears want the opposite and a test of the January lows that will ultimately lead to a bear breakout below the January lows.
- The monthly chart has had consecutive OO (Outside-Outside) patterns. The odds are that the market will fall below the January low before it goes above the January high.
- This month may be an inside bar, and the market goes sideways for a month or two before falling below or above the January range. Al commented on the February 16 blog explaining in more detail the consecutive outside bars on the monthly chart that is worth reading.
- More likely, the daily chart will continue sideways as the bulls and bears decide who is in control.
- It is important to remember that the bulls and bears both have a good case which means the probability, in general, has to be close to 50%. Note: Consecutive outside bars on monthly slightly makes the January low higher probability.
Emini 5-minute chart and what to expect today
- Emini is down 4 points in the overnight Globex session.
- The market had a bounce a few hours after yesterday’s US session closed and has been going sideways in a trading range since.
- Bulls want as big of a gap as possible and a bull trend day today, confirming the possibility of a double bottom higher low major trend reversal on the daily chart.
- Today is likely to be a trading range day or have a trading range open.
- Since today is a Friday, weekly support and resistance are important so that traders will pay attention to the weekly chart’s open and last week’s high/low/open, especially in the final hour or two of today.
- Traders should be open to a strong breakout in the final two hours of the day.
- Like most days, traders should expect a trading range open and a limit order market. Before committing to swing trade, most traders should wait for a strong breakout with follow-through or a reasonable stop entry setup.
Yesterday’s Emini setups
Al created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The EURUSD is deciding if the selloff from the February bull rally is a pullback in what will become a bull trend or the start of a trading range and a possible bear breakout testing the January low.
- At this moment, the odds favor a test of the February high and a breakout above the double top (January and February highs); however, every added bar lowers the probability of the bulls and increases the odds of more sideways.
- While the probability does favor the bulls, traders may wait for consecutive bull bars before committing to longs.
- The bull sees a higher low major trend reversal with February 14 and are currently wondering if the market will have to get down to the February 14 low and form a double bottom higher low major trend reversal.
- The bears are hopeful that the market has a selloff to the January low and breakout below, followed by a measured move down. This is not likely.
- On the monthly chart, the 2021 selloff looks like a bear leg in a trading range, which means that the market should have a bull leg in a trading range lasting at least for a few bars on the daily chart.
- The bulls still have a reasonable chance at getting the bull breakout and measured move up based on the double top (purple lines) projecting up to 1.1844
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Al taking short holiday break, so no Daily Setups chart today.
End of day summary
- The bulls had a strong two-bar bull breakout during bars 4-5; however, it was following a tight bear channel, so the context was not all that great to buy. In general, when you have a tight channel and the market reverses up, it usually reverses into a trading range, not the opposite trend.
- Most Buy The Close bulls who bought bar 5 close got out breakeven when bar 10 went above bar 5, so a sign of disappointed bulls.
- The market went always in short and sold the close during bar 12, and most bears would buy back shorts during bar 19. Bar 19 was the biggest looking bear bar late in a selloff, so traders expected exhaustion and a likely test of bar 19.
- The market formed a credible wedge bottom at the low of the day. It was also a nested wedge bottom with bars (38,44,46) being the third push and a smaller wedge within the large wedge.
- While the bears were strong during bar 11-19, most of the day looked like a trading range day, so it was reasonable to expect a reversal around bar 41 and a bull rally. Yes, it was a bear trend from bars 6 – 46, but there was a lot of buying pressure from bars 19-46 and during bars, 4-5, increasing the odds of a trading range day forming.
- The market broke above a wedge top during bar 55, and it led to a two-legged measured move up based on the wedge top that reached 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.