Market Analysis for Feb 5th, 2021

E-mini S&P 500 Futures: Keep It Simple Stupid –Trend Week Rules, Gummy Bears Being Eaten Alive

Thursday’s session played out as per expectations as a gap up and grind higher type of day riding the train tracks up. Basically, the market broke above its 36~ hour bull flag and accelerated above the key 3840/3850 level in order to produce new all time highs by the end of the session. The feedback loop consists of shorts having zero choice but to buy-to-cover their positions and late chasers fuelling the FOMO.

The main takeaway remains the same for the past few reports, we’re still  treating this week’s low as in from the 3650s double bottom vs January monthly low and that the bull train is likely gearing towards 3976 measured move (derived from many months ago). In addition, NQ/tech is firmly leading the V-shape recovery and sporting the same daily 8/20EMA grind up posture as ES. Keep a close eye on this momentum follow through in the next few sessions. Given the high level consolidation/tight bull flag, the market is going to be attempting an acceleration breakout into new all time highs for all the US equity indices. In addition, the price action is showcasing a massive weekly bull engulf to cement this week’s price action. See if bulls maintain their strength into today’s close per stats. FYI, trend week up context with ATHs (from respective Monday-Thursday range) typically result in 70+% win rate for bulls to complete their task.

What’s next?

Thursday closed at 3866.5 as a new all time high closing print on a daily closing basis. See if today cements that fact with a weekly closing basis in order to continue higher for the rest of February/Q1 2021.

Copying and pasting a core section from our ES trade alert room’s premarket gameplan report where we demonstrate real-time trades and educational lessons. FYI, the ES trade room provides real-time entries and exits with pre-determined stoploss and target levels alongside with real-time lessons on strategy/risk management/psychology/momentum. (some key levels have been redacted for fairness to subscribers)

  • Context remains the same from previous reports;  price has been back to bullish mode as short-term seller/bearish momentum disappeared after the Jan 27-29th backtest into monthly support
  • Given the price action clues from Monday Feb 1st, the market has stabilized from key level 3650s, it formed a double bottom into a V-shape recovery 
  • If you recall, Tuesday Feb 2nd, the market closed above 3800 and 3820 to double confirm bears are extinct as they could not stop the V-shape recovery
  • Déjà vu as trend week rules into Friday highs (when uptrend week Monday-Thursday context, market tries its best to close at highs, 70+% win rate continues)
  • Market has retraced 100% of last week’s 3860s-3680s range and moving towards 3976 measured move target (calculated many months ago since the 3587 breakout setup)
  • Just know that short-term is a bit overextended so be aware of near term 3900 key level to produce another bull flag/consolidation FYI, 3656s low to 3880s high is +6% within 5 sessions
  • ‘Easy ‘money is considered mostly over for this week as price action nearing 2 std highs 
  • Moving forward, weekly chart is poised to wrap up this week as a massive bullish engulfing candle, double confirming that gummy bears are being eaten for breakfast, lunch and dinner. This means that the low of February could be in already from 3650s double bottom

 

  • This report contains a lot of info, know your timeframes and our level by level approach

 

 

Additional context from past few weeks remain mostly unchanged (copied and pasted):

  • The shit hits the fan (SHTF) level has moved up to 3650 from 3592, a daily closing print below 3650 is needed in order to confirm a temp top setup/reversal for the daily+weekly timeframe. (Janurary lows) 
  • A break below 3650 would be a strong indication of weakness given the multi-month trend of being above the daily 20EMA train tracks. For reference, the first week of 2021 (Jan 4th) bottomed out at 3650s vs the daily 20EMA/major support confluence area and then swiftly made new all time highs per our expectations as support held 

 

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Ricky Wen is an analyst at ElliottWaveTrader.net, where he writes a nightly market column and hosts the ES Trade Alerts premium subscription service.