Emini and Forex Trading Update:
Wednesday February 24, 2021
I will update again at the end of the day.
Pre-Open market analysis
The Emini pulled back for a 6th day yesterday. This is the longest pullback since the 10% corrections in September and October. Traders are deciding if this pullback will reach 10% or reverse back up to a new high.
Yesterday then reversed up from the support of a bull trend line on the daily chart, and from just above the February gap. The cash index reversed up from the 50-day MA. Is this just a bounce in a bear trend or a resumption of a bull trend? Traders need to see what happens today and tomorrow before deciding.
The Emini closed near its high. It is therefore a buy signal bar for today for a High 2 bull flag at support. If today is a big bull day, the rally will probably continue to above 4,000. If there is no follow-through buying today or tomorrow, traders will wonder if yesterday was just a bull trap in an early bear trend.
It is important to note that the Emini yesterday rallied strongly, but the rally stopped at the resistance of the 60-minute EMA, the 20-day EMA, the open of the week, and the January high. Was yesterday just a buy vacuum test of resistance in a new bear trend?
There is slightly better than a 50% chance of the rally continuing until the bears get consecutive big bear days. If they get that, the selloff should continue down to below 3,700 and possibly reach 10%.
This is the end of February, and the bulls want February to close above the January high. That would increase the chance of higher prices in March.
The bears want the week to close below the open. That would increase the chance of sideways to down trading next week.
Overnight Emini Globex trading
The Emini is down 5 points in the Globex session. As strong as yesterday’s reversal up was, the bulls need strong follow-through buying today or tomorrow to convince traders that the bull trend is still intact. Without that, traders will wonder if a 10% correction is unfolding.
What is most likely? Yesterday reversed up from a cluster of support, but the rally stopped at a cluster of resistance. That is trading range price action, despite yesterday being a big bull day. It increases the chance of more trading range trading today. It also increases the chance of a trading range open for the 1st hour or two. Furthermore, it reduces the chance of today being a strong trend day in either direction. However, if there is a series of strong trend bars in either direction, the odds of a trend day will go up.
EURUSD Forex market trading strategies
The EURUSD Forex market on the daily chart is stalling at the top of its month-long trading range. Every trading range is a Breakout Mode pattern, which means there is always about a 50% chance of a successful breakout in either direction. Additionally, there is always both a reasonable buy and sell setup.
The bulls hope the head and shoulders bottom will lead to a measured move up, and a breakout above the January high. The bears see a triangle, a Low 2 bear flag, or a double top bear flag, and they want a measured move down to the November low.
The 3-week rally is stalling at the top of the range. Traders are deciding if it will begin a leg down here or soon, or continue up to the next resistance at the January high. Yesterday was an unconvincing sell setup. It was a small bear day after 3 bull days. Today so far is sideways. Traders need more information, which means a better buy or sell setup, or a strong breakout up or down.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market traded below yesterday’s low overnight, which triggered a minor sell signal. However, it has had several reversals, and it mostly has overlapped yesterday’s range. Day traders have been scalping the reversals. They will continue to do that today unless there are consecutive big trend bars breaking above or below yesterday’s range.
The location on the daily chart is good for a big trend day up or down, but the 2 small sideways days makes a continued trading range day more likely.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
Today rallied from a small double bottom and became a strong Bull Trend From The Open. As often happens when there is an extremely strong early rally, the Emini was sideways for a couple hours in the middle of the day, but it rallied to a new high into the close. With the day closing near the high, there is an increased chance of a gap up tomorrow.
Because the rally was climactic, there is a 75% chance of at least a couple hours of sideways to down trading tomorrow that starts by the end of the 2nd hour. This is true even if there is a gap up.
There are only 2 trading days remaining in February. The bulls want the month to close on its high. That would increase the chance of higher prices in March. After 2 strong bull days and only 2 days left, the bears probably cannot do much to change the bullishness of the month.
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 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.