Trading Update: Tuesday January 18, 2022
Emini pre-open market analysis
Emini daily chart
- Emini continued disappointment with daily chart in likely trading range since July.
- Bears see Friday, January 14 as a breakout pullback and are hoping January 13 is a lower high major trend reversal that reaches the December and October 2021 lows.
- The Bulls see December 3 and 20 as a double bottom that leads to a break above the neckline (November highs). Bulls also see the January 10 and 14 as a two-legged pullback from the double bottom (double bottom pullback). Bulls are hopeful the January 14 pullback goes to a new all-time high. However, even if the market gets to a new all-time high, there will probably be sellers. Bears will see any rally to a new high as an excellent opportunity to establish new shorts, confident there will be a test of the December and October 2021 lows.
- Some traders see the January 14 close as the apex of a triangle, with the lows being December 20, January 10, and 14. The highs of the triangle are January 4 and 12. Notice how the January 14 close is close to the midpoint (4646.75) from the current all-time high to the December lows. With January 14 being a triangle in the middle of two important prices, this tells us the probably has to be very close to 50 percent for both the bulls and the bears.
- Overall the bears still see a wedge top (September 2, November 5 or 22, and December 28). They are hopeful any rally that follows January 14 will lead to a double top lower high major trend reversal with January 12 and a test down to the December and October lows. Even if the bulls get a new all-time high, most bears will see the new all-time high as a wedge top and expect a two-legged selloff to the December and October lows.
- Lastly, although a test of the December and October lows is likely in the first half of the year, traders know we are in a strong trend on the higher time frames and will expect any test of these lows to be bought.
Emini 5-minute chart and what to expect today
- The Emini is currently down 40+ points from Friday’s close.
- The bears are hopeful that the Globex selloff is the test that breaks below the January 10 lows. However, more likely, we are in a trading range, and bears will find disappointment during the day session.
- The bears want the market to fall below Friday’s second entry buy and see it as a breakout pullback. The odds are that if the market falls below Friday’s low, it will reverse up soon after.
- The market has been in a 20 point trading range for about 10 hours in the Globex session and will probably breakout to the upside or downside at some point today.
- Most traders will expect a trading range open and will look to scalp until there is a strong setup like a double top or bottom, wedge top or bottom, or a strong breakout with follow-through.
Friday’s Emini setups
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The bulls had a strong breakout on January 12. However, the follow-through has been weak. Currently, the market is testing the December 31 breakout point.
- The bears are hoping the rally up to January 13 is a test of the October lows and a lower high that leads to a bear breakout below the 2-month trading range in November and December.
- While the odds favor a second leg up, the bulls need to show more signs of strength and prevent the bears from getting three consecutive bear closes and especially prevent today from closing on its low.
- January 12 was a strong bull breakout bar. If this is going to be a strong trend, the bulls need to prevent the price from falling below this low, or else traders will view the market as being in a trading range.
- Bulls expect this January 12 breakout to be the start of a test up to the November 9 and October 28 highs.
- Right now, it is important to see what happens today. The bulls need to prevent today from being a strong bear close, or else more and more traders will begin to believe this bull breakout will fail and expect a test back into the apex of the 2-month trading range.
- Update as of 05:45 Pacific time: Price fell below the breakout points of the two-month trading range within the past hour and a half. This greatly increases the odds of the January 12 bull breakout on the daily chart leading to a leg within a trading range rather than a bull trend
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
- Today sold off in a weak bear channel to below last week’s low.
- It reversed up from a wedge bottom and a midday trend reversal.
- After a test of the midpoint of the day’s range, the Emini fell to a new low.
- Today closed just below last week’s low, but just above the 100-day MA.
- Today had a big bear body. If tomorrow is a 2nd consecutive bear bar closing near its low, the Emini should continue down to the December low.
- If it falls below the December low this month, January will be an outside down bar on the monthly chart, and a sell signal bar for an OO top on the monthly chart.
- The Emini has been in a trading range for 2 months. The bulls need a reversal up tomorrow or Thursday to prevent the selloff from breaking below the December low and testing the October low.
See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.
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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.