Emini and Forex Trading Update:
Friday January 22, 2021
I will update again at the end of the day.
Pre-Open market analysis
Yesterday was a bear doji bar on the daily chart, which is weak follow-through for the bulls after Wednesday’s strong rally. It is also a weak sell signal bar, and it therefore increases the chance of at least slightly higher prices next week. Emini near measured move target at 3875.75 based on the September/October double bottom. The Emini might have to get there before the bears will attempt a reversal down.
Because today is Friday, there is an increased chance of a big move in either direction in the final hour. This week has been very strong. The bulls want the week to close on its high, at a new all-time high, and at the measured move target. The bears would like today to reverse down, and close below last week’s high. Both targets are 30 points away, which might be too far for today.
Overnight Emini Globex trading
The Emini is down 27 points in the Globex session. It will probably gap below yesterday’s low. That would trigger a sell signal for a reversal down from the top of the channel on the daily chart.
But there have been many reversals down over the past 2 months, and the bulls bought every one within a few days. They will continue to do that until there are consecutive big down days on the daily chart.
If today’s gap down is small, it will probably close within the 1st hour. The bulls would like a rally to close the gap and then continue to above yesterday’s high. Today would then be an outside up day, and the week would close at a new all-time high. That would increase the chance of higher prices next week.
If the gap down is 10 or more points, the bears would have an increased chance of a bear trend day today. It could even reverse all of Wednesday’s rally.
What is most likely? After a day and a half of sideways trading, traders expect more sideways trading. But because the Emini is in a buy climax, and with Emini near measured move target, traders know that there could be a big trend in either direction. If there is a series of strong trend bars up or down in the first hour, day traders will look for a trend day. However, if the day begins with lots of small reversals, and many bars with big tails, like yesterday, they will expect another trading range day.
Because today is Friday, there is an increased chance of a big move in either direction in the final hour.
EURUSD Forex market trading strategies
The EURUSD Forex market on the daily chart has rallied for 5 days from the bottom of a 2-month trading range. The bulls hope that this is the resumption of the 10-month bull trend. But so far, the rally lacks consecutive strong bull trend bars. It looks more like another small leg in the range. The bulls need a strong break above the January 13 high, and then above the top of the range, before traders will conclude that the bull trend is resuming.
Trading ranges are neutral, but there are times when they are slightly more bullish or bearish. At the moment, this trading range is slightly more bearish. But a couple strong bull days would shift the probabilities in favor of the bulls.
The bears want a lower high. If today closes near its low, it would be a sell signal bar for a lower high major trend reversal. There would also be a head and shoulders top. However, the January 13 high is an important magnet, and there is still room to that target. Consequently, there might be one more brief push up next week, before the bears try to break below the bottom of the trading range. If the bears succeed, they will look for a measured move down to the November 4 low at 1.16.
Overnight EURUSD Forex trading
The EURUSD Forex market rallied overnight on the 5-minute chart and then reversed down. The range has been small and there have been many reversals. Day traders have been scalping up and down for 10 pips.
The bulls want the day and week to close near the high of the day. That will increase the chance of higher prices next week.
The bears need more than the day closing on the low. They need it to close at least 20 pips below the open so that today will be a strong sell signal bar for next week.
With today’s range being small and with room to the January 13 high above, the EURUSD will probably go at least a little higher next week. That reduces the chance that it will trend down strongly to far below the open of the day. Today more likely will remain sideways. Then, next week, traders will decide if the EURUSD has to get closer to the January 13 high before again testing the bottom of the 2-month trading range.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
The Emini had a trading range open. It reversed up from a double bottom just below the EMA to a new high. After going sideways for several hours, the bulls got some trend resumption up at the end of the day, but it failed and the day closed in the middle.
Today is a High 1 buy signal bar on the daily chart. The tail on the top of the bar on the daily chart makes today a weaker buy signal bar.
The daily chart has been in a Small Pullback Bull Trend for 2 months. Traders have been buying every 1- to 3-day pullback, correctly betting on a new high. However, the channel has now lasted more than 50 bars. That increases the chance of a transition into a trading range soon.
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.