Emini and Forex Trading Update:
Wednesday February 10, 2021
I will update again at the end of the day.
Pre-Open market analysis
The Emini formed its 8th day in a bull micro channel yesterday. Since this is unusual, there is an increased chance of a pullback within the next few days.
This is a very strong rally, but it has gone a long way from the January 29 low without a pullback. It is therefore climactic. The rally is similar to the buy climaxes that ended on January 2 and October 12.
The bulls want the rally to continue far above the 4,000 Big Round Number. However, the Emini is just below the top of the 4-month bull channel that began on November 9. The top of the channel today is around 3,927. Most attempts to break above bull channels fail within about 5 days. Therefore, this rally will probably stop within a week.
Whether it reverses down is another story. Traders will buy every reversal down until there are consecutive big bear bars on the daily chart. Once they see that, they will look for a couple legs down over several weeks.
Overnight Emini Globex trading
The Emini is up about 10 points in the Globex session. It will therefore probably gap up. If the gap is less than 5 points, it will probably close within the 1st hour.
The top of the bull channel on the daily chart is around 3,927 today. That is an obvious magnet, and the Emini might have to get there today. The bulls want it to break strongly above it, but yesterday was a broad bull channel. That is a trading range that is tilted up. It increases the chance of more trading range trading today. Also, after 8 days up, the bulls are probably getting exhausted. That reduces the chance of a big bull day.
What about a big reversal down? The past 4 days have had small ranges. That reduces the chance of a big day today.
Since the daily chart is in a buy climax and yesterday’s range was small, if there is early strong selling today, today could reverse down to below yesterday’s low. It would then be an outside down day. Traders would then wonder if this week would close below the open of the week, and form a reversal bar on the weekly chart.
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 has been reversing up from below the January low for 4 days. That low is the bottom of a 2-month trading range. Today broke above last week’s high. This week therefore totally reversed last week’s selloff on the weekly chart.
The reversal on the daily chart is far enough above the bear trend line from the January 6 high to make a 2nd leg up likely. Therefore, the bulls will buy the 1st 1- to 3-day selloff.
Traders will then expect a test of the January 22 lower high. If the rally breaks strongly above that, traders will conclude that the bear trend reversal has failed. They would conclude that the EURUSD was either back to neutral, or resuming is bull trend from last March.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market is trading above its open and above yesterday’s high. If today closes above the open, there will be 4 consecutive bull days on the daily chart.
However, the rally lacks consecutive big bull days. It is therefore not nearly as strong as it could be. That increases the chance of a pullback within a couple days. If today closes below the open, there will probably be at least a small pullback tomorrow. A pullback is a day that trades below the low of the prior day.
Today’s range so far is small. The EURUSD has been in a trading range overnight. Day traders have been scalping up and down for 10 pips. There is no sign that this is about to change. The bulls want a 4th bull day, and the bears want a pullback tomorrow. Therefore, today’s open will be important. If the bulls can get today to close above the open, they will look for higher prices tomorrow. If the bears can get today to close below the open, traders will expect at least a small pullback tomorrow.
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
I mentioned before the open that today could be an outside down day, and it was. The Emini today gapped up to a new all-time high, but then reversed down to below yesterday’s low. It is a sell signal bar on the daily chart. But it was not a big bear day closing on its low, and it is therefore a weak sell signal bar. In addition, after an 8-day bull micro channel, the 1st reversal down typically only lasts 1- to 3- days. Also, the day after a big day that closes in its middle more often than not mostly overlaps the big day.
The Emini is in a buy climax at the top of a 4-month bull channel. Traders should expect a 10% pullback to begin at any time. But the bears will probably need at least a micro double top before a reversal will begin.
Furthermore, every strong bull trend has lots of minor reversals. Yet traders buy them, confident that they will be brief and soon lead to a new high. They will continue to buy reversals until there are consecutive big bear bars. At that point, the odds will shift in favor of a 10% pullback.
Today’s selloff was a test of the open of the week. It could be a magnet in the final hour on Friday. The bears want the week to close below the open of the week. This week would then have a bear body. It would be a sell signal bar on the weekly chart for a possible reversal down from the top of the 4-month bull channel.
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
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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.
Emini 5 minute at the open. Sorry for the bar question here on the end of day summary comments. There wasn’t a bar-by-bar analysis on Price Action today. Could you please clarify, after bar 1 closed, did the bears conclude selling below bar 1 was reasonable or selling below bar 2 after bar 2 closed (bar 2 seemed to be disappointing follow through after bar 1)?
I also thought the bears would want more context at the open, a wedge top at least and/or a double/micro double top before selling. Or is it simply, the bears took a L1 bet at the open?
Thank you always, for your analysis and the time you take to educate.