Emini Bears Want Strong Reversal Bar Today

Trading Update: Wednesday January 25, 2023

Emini pre-open market analysis

Emini daily chart

• Emini bears want strong reversal bar (sell signal bar) to reverse the strong two-bar bull breakout.
• The daily chart closed as a bull inside a bar yesterday.
• The bulls are hopeful that yesterday was just a one-bar pullback from the January 23^rd bull breakout.
• The bears want yesterday to be a final flag and for any upside breakout above yesterday to fail.
• While the market is Always In Long, it is likely a bull leg in what will become a trading range.
• The bears will look to sell a micro double top, which would be a second entry short.
• If the bears can get a second entry short, they would try for a second leg down from the December 19^th selloff.
• Since the market is in a trading range, traders should expect both the bulls and the bears to continue to be disappointed.
• The market will likely do something to make the bulls question their premise of being long the current price level. However, it will also make the bears question if the bears should short, betting on a wedge top (January 3^rd, January 13^th).
• The daily chart is near the middle of the range from the past seven months. This makes the market confusing, and the probabilities close to neutral.
• The bulls want an upside breakout and a test of the December 13^th high, and the bears want a downside breakout and a test of the December 2022 low.
• Most traders should wait for more information. When the market gets confusing, and it is difficult to decide what to do, it is usually best to step aside until there is more clarity. Traders should wait for one side to gain strength through consecutive strong trend bars.

Emini 5-minute chart and what to expect today

• Emini is down 50 points in the overnight Globex session.
• The Globex market has been in a bear trend since yesterday’s close on the 15 min chart.
• The bears got a strong bear breakout late yesterday evening, and the market had a second leg down that began around 1:00 AM PT this morning.
• The bears want today to reverse the January 23^rd bull follow-through bar.
• If the bears can get today to close on its low, the bulls may exit and step aside on the daily chart to see what the bears can do.
• Traders should expect a trading range open and the market to go sideways for the 6-12 bars. This means that traders who are unwilling to fade breakout with wide stops and limit orders should step aside for 6-12 bars until there is a clear breakout with follow-through that is likely to get a second leg.
• The open will often form a swing trade within the first two hours. The swing will usually begin after a double top/bottom or a wedge top/bottom forms; therefore, traders can look for a stop entry after one of the above-mentioned patterns. This will allow a trader to enter a trade with reasonable probability and a decent chance at getting two legs and twice their risk.
• Since the market is likely to narrow on the open, traders should assume the market will go sideways and try to get a second leg down.
• A gap down on the open is the same as a bear breakout, which means the odds favor a second leg down. Just like a trader would look for a bear breakout to have a second leg, they should look for the gap down to have a second leg down in the first 1-2 hours of the opening session.
• The bulls will try and get an opening reversal and trend from the open bull trend. However, the odds will favor a second leg down (assuming the open has a large gap down), which means most bulls are better off waiting to look to buy a failed bear breakout on the open.

Emini intraday market update

• The Emini gapped down and had a second leg down from the gap that began on bar 4.
• The bears got a three-bar breakout that ended on bar 6. However, it was strong enough to get a second leg down after and pullback likely.
• The bears got a second leg down to around 7:30, and the market has sharply risen since the bar 15 low.
• The bulls did a good job getting decent buying pressure during the first 15 bars of the day, which increased the probability of a second leg down.
• With the gap as large as it was, the odds favored a trading range to the moving average, which is why the market reversed sharply as it did around 7:45 AM PT.
• The bulls want a bull trend day; however, the day will likely remain a trading range day.
• The gap down is large enough to likely limit the day from becoming a strong bull trend day.
• I am writing this at 8:45 AM PT, and the bulls are trying to get an upside breakout above the bar 3 high of the day.
• At the moment, the channel up from bar 15 is tight, and the downside is likely limited unless the bears can get more selling pressure. However, the market may get a deep pullback from the rally up to bar 27 high (8:45 AM PT). The reason for this is that the bulls may need a higher low major trend reversal which would mean the market may get a deep pullback that could test the 50% pullback level of the rally that began at the low of the day.

Yesterday’s Emini setups

Al created the SP500 Emini charts.

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. These therefore are swing entries.

It is important to understand that most swing setups do not lead to swing trades. As soon as traders are disappointed, many exit. Those who exit prefer to get out with a small profit (scalp), but often have to exit with a small loss.

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

EURUSD Forex daily chart

• The EURUSD has been forming a wedge top over the past ten trading days. This will increase the odds of a two-legged pullback to the moving average (blue line).
• The bulls want the market to continue the small pullback bull trend. However, the upside will likely be limited, and the market will soon transition into a trading range.
• The bears need to form more selling pressure before most of the bears are eager to sell.
• The weekly chart will likely form a higher low major trend reversal over the next several months. This means that the daily chart will likely have a deep pullback which could test all the way down to 1.044 before the market finds buyers.

Summary of today’s S&P Emini futures price action and what to expect tomorrow

Al created the SP500 Emini charts.

End of day review

• Today was a wedge bottom that led to a small pullback bull trend day.
• The market had a large gap down, which formed a second leg down to 7:45 AM PT (bar 15).
• The day’s low formed a wedge bottom that led to an endless pullback and an upside breakout that led to a small pullback bull trend for the rest of the day.
• The channel up was tight for most of the day. While the bears had several attempts at wedge tops, they were all minor.
• In general, when you have a small pullback bull trend, it is better to wait for a clear trendline break of the bear trend and a breakout below the moving average. After a test of the moving average, traders should wait and see what the retest of the highs looks like before looking to go short.
• Until the bear are making money below bars, it is best to assume that the channel is tight and to only look to buy.
• Overall, today was a 50% pullback for the bulls on the daily chart over the past three trading days.
• Today was also the 4^th consecutive bull trend day. This will increase the odds that tomorrow will be a bear bar and end the four-bar bull streak on the daily chart.

See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.

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Charts use Pacific Time

When times are mentioned, 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.

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