Emini and Forex Trading Update:
Friday February 12, 2021
I will update again at the end of the day.
Pre-Open market analysis
The Emini formed an inside day yesterday after Wednesday being an outside day. An Emini ioi Breakout Mode setup (inside-outside-inside pattern). Yesterday is both a buy and sell signal bar.
Because yesterday had a bear body, it is a lower probability buy signal bar. But since the 2-week bull channel is tight, and yesterday had a big tail below, it is a low probability sell signal bar. If it is bad for both the bulls and bears. Who is it good for? Limit order traders. There might be more sellers above and buyers below.
Both yesterday and Wednesday spent a lot of time around the open of the week. That means it is important. The bears want the weekly chart to have a bear body. It would then be a sell signal bar.
However, the bulls want a bull body. That would increase the chance of sideways to up trading next week.
Because the open of the week is important, it could be a magnet in the final hour today. If the Emini is within 10 to 20 points of the open going into the final hour, it might get drawn to the open of the week at the close of the week.
Overnight Emini Globex trading
The Emini is down 7 points in the Globex session. It has been forming a triangle over the past 3 days, on the day session chart around a cluster of magnets. These are the open of the week, the 3,900 Big Round Number, and the 60-minute EMA.
The most important price is the open of the week. If the Emini closes below the week’s open, this week will have a bear body and be a sell signal bar on the weekly chart. The bigger the bear body is, the more reliable the sell setup will be. If the Emini is within 10- to 20-points of the open in the final hour, traders should look for a reversal to the open.
It is important to understand that when there is a magnet like this, the market often decides to ignore it at the end of the day. For example, there could be either a late strong rally to far above it, or a late strong selloff to far below it.
Can today be either a strong trend day up or down? Any day can, but it has been paying a lot of attention to those magnets this week. That increases the chance that the week will remain small, and traders will wait for next week to decide on the direction of the next move. But if there is a series of strong trend bars up or down on the open, there will be an increased chance of a trend day today.
EURUSD Forex market trading strategies
The EURUSD Forex market on the daily chart has been in a bear channel for 6 weeks. The bears are hoping that yesterday was the end of a leg up. Since the rally is a small wedge top, they expect at least a couple legs sideways to down over the next few days. They want yesterday be a lower high double top with the January 22 lower high, and they want today to be a resumption of the bear trend.
However, after a strong 5-day rally and a break above the bear channel, it is more likely that the bulls will buy this selloff. There should be a higher low, and a 2nd leg sideways to up. Therefore, the best the bears will probably get is about a 50% pullback for a few days that tests the January 1 low. The bulls should buy at that point.
If the bulls fail to get a strong breakout above the January 22 high, the bears will get another leg down. If they then get a strong break below the February 5 neckline of that double top, traders will expect a measured move down to the November 4 low at 1.16.
This decision process will take some time. Consequently, traders should expect at least a couple small reversals over the next two weeks, before the market decides between a continued bear trend or a resumption of last year’s bull trend.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market sold off overnight to far below yesterday’s low. This triggered a parabolic wedge sell signal on the daily chart. The selloff should reach the January 1 low at around 1.20 over the next several days.
While the overnight selloff has not yet been particularly strong, the pullbacks have been small. Day traders have only been selling.
The EURUSD has been sideways for a month and today’s range is about average. Also, the overnight selloff has not had consecutive big bear bars and therefore is not very strong. Therefore, there may not be much left to the selloff. But until there is a 20- to 30-pip bounce, day traders will only sell. Once there is a bounce, day traders will expect the bear trend to evolve into a trading range. At that point, they will also look to buy reversals up from the low for scalps.
Can today reverse back up to the high? Yes, but it is more likely that it will be sideways to down. This is because the parabolic wedge top on the daily chart should lead to a few days down.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
The Emini rallied from a trading range open, but reversed down from a double top just below yesterday’s high. The bulls got huge trend resumption up at the end of the day. Today broke above yesterday’s high, which triggered a High 1 buy signal on the daily chart. It also closed at a new all-time high.
While Tuesday might gap up, today’s close was a buy climax. There is a 75% chance of at least a couple hours of sideways to down trading beginning by the end of the 2nd hour on Tuesday.
The weekly chart had a bull body this week, which confirms last week’s strong reversal up. It increases the chance of at least slightly higher prices next week. Next might even gap up to a new all-time high on the weekly chart. However, because the buy climaxes on the daily, weekly, and monthly charts are extreme, a surprise reversal down can come at any time.
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.