Emini and Forex Trading Update:
Friday February 5, 2021
I will update again at the end of the day.
Pre-Open market analysis
The Emini yesterday formed its 4th consecutive bull bar on the daily chart. It closed on the high and at a new all-time high. There is an increased chance of a gap up today, and an Emini buy climax over the next week, like at September 2 and October 12. The bulls want the rally to continue up to above the 4,000 Big Round Number, before there is more than a small pullback.
Despite the strong 4-day rally, the bears are hoping it is just a buy vacuum test of resistance at the January high. They want a reversal down from a double top with the January high. But given that the rally is strong, the bears will probably need a micro double top, before they can get a reversal down to the bottom of the 5-week trading range. Consequently, the bulls will probably buy the 1st 1- to 2-day pullback. Therefore, the downside risk is small over the next few days. Traders will continue to buy small pullbacks, confident that they will keep getting new highs.
Overnight Emini Globex trading
The Emini is up 16 points in the Globex session. It therefore will probably gap up above yesterday’s high to a new all-time high. If the gap is small, it will probably close in the 1st hour. However, the Emini is accelerating up, like it did in late August and in October. That increase the chance of a blow-off top over the next several days.
If this is the start of a blow-off top, the rally often forms a micro channel on the daily chart (most days having a low above the prior day’s low and a high above the prior day’s high). In a micro channel, the days often are trading range days, but most close above the open. In any case, with the 4 consecutive bull days closing above their midpoints, and breaking to a new high, traders will expect today to again be a sideways to up day. It reduces the chance that today will be a strong bear day.
Yesterday was a buy climax day on the 5-minute chart. The day after a buy climax day has a 75% chance of at least a couple hours of sideways to down trading beginning by the end of the 2nd hour.
One final point about the daily chart. There was a double bottom in September and October. Today will probably open above the measured move target of 3875.75. That increases the chance of some profit taking today, which means the Emini might stall here for a day or two.
Yesterday’s setups
Here are several reasonable stop entry setups from yesterday. I show each buy entry with a green rectangle and each sell entry with a red rectangle. Buyers of both the Brooks Trading Course and Encyclopedia of Chart Patterns have access to a much more detailed explanation of the swing trades for each day (see Online Course/BTC Daily Setups).
My goal with these charts is to present an Always In perspective. If a trader was trying to be Always In or nearly Always In a position all day, and he was not currently in the market, these entries would be logical times for him to enter.
If the risk is too big for your account, you should wait for trades with less risk or trade an alternative market like the Micro Emini.
EURUSD Forex market trading strategies
The EURUSD Forex market on the daily chart finally closed below the 2-month trading range yesterday. The January 1 low is also the neckline of a head and shoulders top.
Today is the day after a breakout, which makes it the follow-through day. The more bearish it is, the more likely the selloff will continue down for a measured move. But the more bullish it is, the more likely the breakout will fail, and the EURUSD will reverse up.
At a minimum, the bears want a small bear body. Today would then be the 2nd consecutive close below the January 1 breakout point. That would “confirm” the breakout and increase the chance of lower prices.
The bulls want more than a bull body. If they get a big bull bar, traders will conclude that the breakout failed. The odds of a reversal up would further increase if there were several more bull bars over the next several days.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market reversed up strongly overnight from below yesterday’s low. So far, today is a bull bar closing on its high on the daily chart.
If today ends like this, the bears will buy back their shorts, and the bulls will look for at least a few days of sideways to up trading. If they get several bull days, traders will conclude that the breakout failed, and that the rally will test the January 22 lower high in the middle of the 2-month trading range.
The overnight reversal is strong enough for traders to only buy. They are buying for a swing up on the daily chart and for scalps. If the rally stalls and evolves into a trading range, the bears will begin to scalp as well.
Can today reverse back down to the low? That is unlikely when there is a strong reversal up from a critical price. Therefore, today will probably be sideways to up for the rest of the day.
The close will be important. If today closes near its high, it will be a good buy signal bar on the daily chart. The bears do not want that. They will try to get the day to close below the midpoint of the day’s range. But they will probably need at least a 2-hour trading range before they have a chance of achieving their goal.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Here are several reasonable stop entry setups for today. I show each buy entry with a green rectangle and each sell entry with a red rectangle. Buyers of both the Brooks Trading Course and Encyclopedia of Chart Patterns have access to a much more detailed explanation of the swing trades for each day (see Online Course/BTC Daily Setups).
My goal with these charts is to present an Always In perspective. If a trader was trying to be Always In or nearly Always In a position all day, and he was not currently in the market, these entries would be logical times for him to enter.
If the risk is too big for your account, you should wait for trades with less risk or trade an alternative market like the Micro Emini.
End of day summary
The Emini gapped up to a new all-time high, but then sold off exactly to yesterday’s high. It rallied from a wedge bottom to a new high of the day. But the 1st 2 1/2 hours formed a triangle, which is a magnet for the rest of the day.
Today closed just below the open and it therefore had a small bear body. It is therefore a weak sell signal bar on the daily chart for an expanding triangle top. However, there is a 6-bar bull micro channel. The bears therefore typically will want at least a micro double top before shorting in a strong bull trend. Traders will probably buy the 1st 1- or 2-day pullback.
See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.
Trading Room
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 Standard Time
When I mention time, it is USA Pacific Standard Time (the Emini day session opens at 6:30 am PST, and closes at 1:15 pm PST). You can read background information on the intraday market reports on the Market Update page.
