Trading Update: Tuesday February 1, 2022
Emini pre-open market analysis
Emini daily chart
- Yesterday’s rally on the Emini is a strong entry bar following the second entry buy on January 28. An Emini strong reversal up from January selloff.
- While the market might be always-in long, traders may still see this rally from the January 24 low as minor.
- The market is at important resistance levels: 4500 round number, December lows, and the midpoint of the January selloff (4510.50). These resistance levels increase the odds that the market may go more sideways.
- The past two bars on the daily chart are a surprise and probably strong enough for at least a second leg up.
- Some traders will view yesterday as a bull breakout of a bear flag that started after the January 24 low. Those traders will expect a measured move up to the 4600 area.
- On the daily chart, the past two trading days will make bears less eager to short a 50% pullback of the January selloff (4510.5) for a swing trade. Those bears will likely wait for a second leg up and see if the bears can get a strong sell signal bar.
- As strong as the past two days appear, it is important to remember that the market is likely in a trading range, and the 4500 price level is around the middle of the trading range. The middle of any trading range is usually a bad area to buy or sell.
- Bulls hope this is the start of a bull breakout that leads to a test of the all-time highs.
- Bears see the past two days as a vacuum test of resistance 4500 big round number and will look to sell a lower high major trend reversal.
- The bears will probably need a micro double top below to get a credible major trend reversal setup.
- The past two bull bars are strong enough that most bears will want to step aside and see how strong the bulls are before selling.
- Monday is a give-up bar, which means the market should have at least a second leg up before the bears can get a credible short. Traders will pay close attention to see how much conviction the bulls have at this price level.
Emini 5-minute chart and what to expect today
- Emini is up 16 points in the overnight Globex session.
- The Emini has gone sideways in a trading range during the overnight session.
- As of this moment, the market will probably open around yesterday’s close.
- The market is likely to have a trading range open today.
- Most traders should wait for a clear breakout or wait for a credible stop entry swing trade. This could come in the form of a double bottom or double top, a wedge bottom, or a wedge top.
- Traders are likely to pay close attention to the open of the day today, and it will likely be a magnet all day.
Yesterday’s Emini setups
Al created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The bears are failing to hold below the two-month trading range.
- Bulls and bears both saw the bear breakout last week as a breakout below a final flag. Bulls and bears were both eager to buy when the follow-through on January 28 was a Doji, indicating lack of conviction to go further down.
- The first target for the bulls is the high of the January 26 bear breakout, followed by a retest of the January 13 bull breakout.
- Bulls see the past few days as a lower low major trend reversal setup.
- So far, today is follow-through after yesterday’s big bull trend bar and the current price is at the high of the bar.
- It is important to remember that today’s bull bar can look very different when the U.S. session closes. While it is unlikely that today will close as a bear trend day, the bears will try to weaken today’s bull bar as much as possible before the close of the U.S. session. Bulls want the opposite and will do everything they can to keep the bull bar as big as possible.
- On the lower time frames, bulls will buy pullbacks, and bears will look to sell reversals.
- The odds are the U.S session will mostly go sideways today as the bulls try to keep the market at the current price, and the bears try and get today to close as close to its midpoint as possible.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Al created the SP500 Emini charts.
End of day summary
- Today, the Emini formed a wedge bottom that reversed into a trading range day.
- At 12:00, the market had a bull breakout that rallied into the close.
- Today was a limit order market for most of the day, and traders would like to buy low, sell high, and scalp.
- It is important to remember that most of today was not ideal for swing trading until late in the day during the bull breakout at 12:10.
- The market was in a triangle for most of the day. This means that around 10:00 – 12:00, the market was in breakout mode, and the probability was around 50% for both the bulls and the bears.
- When the range gets tight, like it did around 11:00, most traders are better off waiting for the bull breakout.
- The rally into the close was climactic, so traders will expect a trading range for at least a few hours on the open tomorrow to relieve the likely exhausted bulls.
- The bears see today as a bull breakout of a final flag and are hopeful tomorrow will reverse back into the middle of today’s trading range.
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 on trading room days. We offer a 2 day free trial.
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.