Emini reversing down at the end of January

Emini and Forex Trading Update:
Thursday January 28, 2021

I will update again at the end of the day.

Pre-Open market analysis

Emini reversing down. The Emini formed a big bear day yesterday on the daily chart. It poked just below the bottom of the 3-month bull channel and the 50-day MA, and fell below the open of January and close of 2020.

More importantly, it broke far below the 3-week bull trend line, and far below the bull trend line drawn from the January 4 to January 15 lows. This was the biggest break below any bull trend line since the bull channel began on November 10. It therefore represents a significant change in behavior.

If today is a 2nd consecutive big bear day, traders will conclude that the Emini is finally transitioning from a bull channel into a trading range. The bottom of the range might be at the start of the bull channel. That is the November 10 low at around 3500, which is about a 10% correction.

There have been many big bear days over the past 3 months. Each was followed by a bull day, and then by a new high. Therefore today is important. If it is a strong bull day, the odds will again favor the bulls. But if it is a bear day, the odds will favor the bears, like it did in early September and again mid-October.

I have been saying all month that this month’s close would be important. If it is a 3rd consecutive bull bar, traders will expect higher prices in February. If it closes in the middle, they will expect sideways to down in February. If it closes near the low, it will be a good sell signal bar on the monthly chart, and they will expect a pullback in February. The Emini might wait until the final hour on Friday to decide how January will look on the monthly chart.

Overnight Emini Globex trading

The Emini is up 40+ points in the Globex session. Since yesterday was a sell climax day, there is a 75% chance of at least a couple hours of sideways to up trading beginning by the 2nd hour.

Every big bear trend day since late October has been followed by a bull day. Traders have been looking at the big bear days as buying opportunities. That makes it likely that many bulls will buy today.

But will they get the day to close above today’s open, like they did on the day after every other big day? If they do, traders will assume that the bull trend is intact.

But if today closes below the open, traders will conclude that something has changed. That would increase the chance of lower prices over the next few weeks. This is especially true if today closes far below the open. Therefore the open will be important today, which increases the chance of today oscillating around it. That would create a trading range day.

Tomorrow is the final trading day of the month. The open of the month will therefore be important through tomorrow’s close.

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 formed both a small double top and double bottom over the past 3 weeks. This is a Breakout Mode pattern, and it is within a 2-month trading range, which is a bigger Breakout Mode pattern. Traders looking for a trend just have to wait.

Most traders are looking for reversals every few days, and they are taking quick profits. Everyone knows that the trading range has lasted a long time. They expect it to end soon. But until there is a clear breakout, traders will continue to look for small reversals.

Overnight EURUSD Forex trading

The 5-minute chart of the EURUSD Forex market has been sideways overnight and its range is small. The low is above yesterday’s low, and the high is below yesterday’s high. Today therefore so far is a small inside day. The range is so small that it has been difficult for scalpers to make even 10 pips on a trade. However, unless there is a series of strong trend bars up or down, day traders will continue to look for small reversals to scalp.

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

The Emini opened with a huge gap up and rallied for 3 hours. It broke above yesterday’s high, the 3800 Big Round Number, and the 60-minute EMA, but then went sideways for 2 hours. The Emini then sold off from a higher high major trend reversal and small Expanding Triangle top.

It trended down for the rest of the day and closed in the middle of the day’s range. While it was a bull bar on the daily chart and it reversed yesterday’s selloff, if closed near the open. It is back in the mid-January trading range.

The bulls are hoping that yesterday was a bear trap and that today was a resumption of the bull trend. However, the bears want a lower high on the daily chart, which would be a lower high major trend reversal and the right shoulder of a head and shoulders top. Today’s reversal up was strong enough to undo the bearishness of yesterday, but it was not enough to convince traders that the bull trend is resuming. Traders will watch the next few days to see if there is a strong move up or down.

Tomorrow if the last day of January. Monthly support and resistance could be important, especially in the final hour. The open of the month is the most important price. It January has a small bear body, it will reduce the chance of higher prices in February. If it has a big bear body, traders will look for lower prices in February.

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

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.

---