Trading Update: Monday January 9, 2023
Emini pre-open market analysis
Emini daily chart
- The bulls got a strong outside up bar on Friday going into the weekend. Bull follow-through wanted after Friday’s strong bull close.
- Friday’s bull breakout closed above the past 11 bars of the tight trading range.
- At the moment, the odds favor a second leg up and a test of the December 6th low, which is the bottom of the month-long trading range.
- The bulls want today to be another strong bull trend day, which would be a follow-through from Friday’s bull breakout. This would increase the odds of the market going higher and possibly reaching the December highs
- The market also has a 4,000 big round number, which is an obvious magnet for the bulls. The 4,000 round number has been a magnet for the past nine months and will likely continue to be a magnet in the future.
- The bulls want this to be a credible higher low major trend reversal that leads to a strong bull trend; however, any rally we get will likely be a bull leg in what will become a trading range.
- Bears do not care if the market gets a rally here as long as the market stays below the December 13th low and continues to form lower highs.
- The bears will try hard to keep the December 6th breakout point gap open. This would make the bulls who got trapped buying the December 6th low during December 15th have to decide what to do.
- Overall, today will be an important day. The bulls need to get follow-through to convince the bears that the market is going higher. If the bears create a strong reversal bar, it will increase the odds that the market will continue to be in a trading range.
Emini 5-minute chart and what to expect today
- Emini is up 22 points in the overnight Globex session.
- The Globex market has been in a tight trading range since Sunday’s open.
- The bulls want the trading range to continue to form higher lows and get an upside breakout, leading to a strong trend during the day session.
- With Friday being such a climactic day for the bulls, the odds favor a 75% chance of sideways for two hours beginning before the end of the second hour.
- Traders should assume the day will have a lot of trading range price action and, therefore, be cautious of breakouts on the open.
- While there is a 50% chance the open may have trend resumption, traders should assume that most breakouts will fail to go far and be patient.
- Most traders should consider not trading for the first 6-12 bars of the day.
- If traders prefer stop entries, they can consider waiting for a double bottom/top or a wedge bottom/top. The market will often form one of these patterns on the open (during the first 1-2 hours of the day), and it will usually lead to a reasonable stop entry swing trade for a couple of legs.
- Lastly, if the day has a lot of trading range price action and the market is near the day’s open, traders should pay close attention to it as it will likely be a magnet all day, especially going into the close, if the market is near it.
Emini intraday market update
- The market gapped up and formed a trend from the open of bar 3.
- The bulls managed to get a 7-bar micro channel that ended at 7:10. This was a strong enough breakout to have a second leg up likely.
- The market is getting trend resumption up on the open. However, as I said earlier in the report, there is still a 75% chance of two hours of sideways trading beginning before the end of the 2nd hour. This is due to the climactic behavior of Friday.
- This means traders should expect the current trend from the open bull trend to transition into a trading range over the next couple of hours.
- The bulls will try hard to get follow-through today on the daily chart. The market may go sideways for several hours. It gets trend resumption late in the day, satisfying the 75% probability of sideways and allowing the bulls to get follow-through from Friday’s rally.
- Overall, the low of the day is likely in and the best the bears can get is sideways over the next several hours.
Friday’s Emini setups
Brad created the SP500 Emini charts.
Here are several reasonable stop entry setups from Friday. 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 market got a strong bull close on Friday after two legs down, falling below the moving average.
- At the moment, the bulls have a strong follow-through bar today. However, the day is not over. The bulls need to keep the bar closing on its high for the next several hours. This means traders need to be mindful of the bulls scalping out and the bears selling aggressively, which would cause a weak bull follow-through bar today.
- The bulls want the market at a minimum to get a close above the midpoint of today’s bar, and the bears want the opposite.
- Even if the bulls get a strong bull close and a rally above January 2nd, sellers are still likely not far above, and the market will go sideways at a new high.
- While the market may continue higher, more likely that the market is transitioning into a trading range, and it will get a deeper pullback closer to the November 21st low. This is because the rally from the start of November is a bull breakout of a very tight channel on the longer-term charts.
- This means that the bulls will likely need a deep pullback and a higher low major trend reversal on something Like the weekly chart to sustain the rally.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Brad created the SP500 Emini charts.
End of day review
- Today, I gapped and rallied on the open for the first two hours.
- The market formed a wedge top around 11:00 AM Central time and sold off for the rest of the day.
- The bears got a lower high major trend reversal around 11:00 AM Central. However, the reversal pattern did not lack enough bars, which increased the odds of being minor.
- The bears ended up getting an endless pullback, and the 11:00 AM Central reversal became a major trend reversal pattern.
- The bears got a very strong breakout around 12:30 AM Central, and the market sold off in a tight channel for the rest of the day.
- Overall, today was a low-probability event. When the market has as much buying pressure as it did during the first 2 hours of the day, it usually does not fall below the day’s low. Here, the market broke far below the day’s low, which trapped the scale in bulls adding to the selling on the way down.
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
Al Brooks and other presenters talk about the detailed Emini price action real-time each day in the BrooksPriceAction.com trading room. We offer a 2 day free trial.
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.
End of Day Chart and Comments Posted.
Thanks Brad, time for my homework to review my chart/entries with yours