Emini strong leg down in 2-month trading range

Trading Update: Friday January 14, 2022

Emini pre-open market analysis

Emini daily chart

• Yesterday triggered a sell signal by going below Wednesday’s low. There is an Emini lower high major trend reversal after a 4-month wedge top and strong leg down in 2-month trading range.
• But Wednesday was a doji bar and therefore a weak sell signal bar. Also, the rally on Monday and Tuesday was stronger than the selloff at this point.
• The bears need strong follow-through selling over the next few days to convince traders that the Emini will test the December low before making another new high.
• Remember, I have been saying that the rally since September looks like a bull leg in what will become a trading range. Traders are constantly deciding if the evolution to a trading range from a bull trend has begun. Once the bears start to break strongly below higher lows, the Emini will be in a trading range.
• What about a bear trend on the daily chart? A bear trend is a series of lower highs and lows. The bears will need at least a couple lower lows.
• Even then, the Emini will still be in a bull trend on the weekly and monthly charts.
• If there is a reversal down on the monthly chart from its micro wedge, the selloff should only last 2 to 3 bars (months) before the bull trend resumes.
• Today is Friday so weekly support and resistance can be important, especially in the final hour.
• The bears want the week to close on the low. There would then be consecutive big bear bars closing near their lows on the weekly chart. That bear surprise would likely have at least a couple legs down and lead to a break below the December low.
• At a minimum, the bears want the week to close below the open. It would then be a bear follow-through bar after last week’s big bear bar on the weekly chart. That would increase the chance of lower prices next week.
• The bulls want the week to have a bull body on the weekly chart.
• While they would like the week to close on its high, there is only a small chance of that happening since the high is so far above yesterday’s close.

Emini 5-minute chart and what to expect today

• Emini is 30+ points down in the overnight Globex session. It will therefore gap down today.
• The bears want another strong bear trend day and then a break below the December low. That is probably too far to reach today.
• Also, the day after a sell climax day only has a 25% chance of being a strong bear day. But it has a 50% chance of some follow-through selling in the first hour.
• Since yesterday was a sell climax day, there is a 75% chance of at least a couple hours of sideways to up trading that starts by the end of the second hour.
• Since the Emini has been sideways for 2 months, there have been reversals every few days. Therefore, despite yesterday’s strong selloff, today could reverse up at some point today.
• If the market reverses up on the open, the 1^st reversal up will probably be minor because yesterday’s late selloff was in a tight bear channel. The bulls would probably need a test down and a 2^nd reversal up if they are to get a bull trend day today.

Yesterday’s Emini 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. These therefore are swing entries.

It is important to understand that most swing setups do not lead to swing trades. As soon as traders are disappointed, many exit. Those who exit prefer to get out with a small profit (scalp), but often have to exit with a small loss.

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

EURUSD Forex daily chart

• Wednesday broke far above the 7-week tight trading range and bear trend line from May 25 high.
• Yesterday was a bull follow-through bar, which increases the chance that the breakout will be the start of a swing up. However, it had a prominent tail on top, and it is therefore weak follow-through.
• Today so far is another small doji day. It currently has a bear body.
• This weak follow-through increases the chance of a test down to the top of the 7-week tight trading range early next week.
• The bears want the breakout to fail. They will need at least a couple big bear bars to make that likely. Currently, the odds favor higher prices.
• First target for the bulls is a breakout above the October 12 low, which was the breakout point for the November collapse.
• Above that is the November 9 high, which was the top of the most recent sell climax.
• The most important target is the October 28 major lower high. If the bulls break strongly above that, then the yearlong bear trend will have ended. The daily chart would then either be in a trading range or a bull trend.
• On the weekly chart, this week is a bull bar with a close above the bear trend line and the top of the 7-week tight trading range. The bears will try to get the week to close back at the trend line instead of on the high of the week. That would reduce the chance that the reversal up will be successful.
• If next week is a bull bar, it will increase the chance of a reversal up to the October 28 high.
• If instead it is a bear bar closing near its low, it will be a Low 2 sell signal bar for a failed breakout above the tight trading range and bear trend line. The bigger the bear body and the more it closes near its low, the more bears will short below this week’s low.

Summary of today’s S&P Emini futures price action and what to expect tomorrow

End of day summary

• The Emini gapped down, but rallied back to yesterday’s close.
• After a micro wedge top, it sold off to a lower low double bottom.
• It was in a triangle for the 1^st half of the day.
• It broke below the double bottom and reversed up to close above the open of the week and in the middle of its 2-month trading range.
• Today is a High 1 buy signal bar for another higher low in the bull channel since the December low.
• While the Emini should sell off to the December low and probably the October low this year, most reversal attempts fail. Therefore, despite Thursday’s big selloff, a new high is still more likely before there is a strong break below the December 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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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.

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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.

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