Trading Update: Wednesday November 1, 2023
S&P Emini pre-open market analysis
Emini daily chart
- The Emini formed a 2nd consecutive bull breakout bar, closing above its midpoint yesterday. The bulls see the consecutive bulls bars as strong enough to get a second leg up likely.
- The target for the bulls is the October 3rd breakout point low. This is because the daily chart is in a bear channel, and the prior breakout point lows have closed. Trends typically get weaker as they progress, which means the odds favor the market going above the October 3rd low and allowing the bulls to make money.
- The bulls have the argument that the bears failed to break below the bottom of the bear trend channel line (August 18th, October 3rd, and October 27th). This increases the odds of a test of the top of the channel, which is currently near 4,350.
- If the bulls manage to get an upside breakout, traders will see a test of the top of the bear trendline as being imminent.
- The bears want the market to continue the trend, forming lower highs and lows. More likely, the daily chart is in a trading range, and the bear channel will evolve into a trading range.
- Today is an FOMC day, and traders will wonder if the FOMC report will drive the market up to the October 3rd low.
- Overall, the daily chart will probably test 4,300 in the next week or two.
Emini 5-minute chart and what to expect today
- Today is an FOMC day, which means traders should be prepared for a lot of trading range price action leading up to the report.
- Traders should stop trading at least 45 minutes before the report is released. Otherwise, if a trader trades up into the report’s release, they risk getting trapped and being forced to close the trade for a loss right before the report.
- Once the FOMC report is released, a trader should wait for two closes after the report before placing a trade. FOMC report bars often have big breakout bars that are followed by reversals. So, waiting for two bars to verify the breakout is getting follow-through is better.
- FOMC events increase the volatility dramatically. There is nothing wrong with not trading FOMC events. Low-probability events typically have a higher probability compared to normal market conditions.
- This means that it is reasonable to consider the afternoon off on days with FOMC reports. FOMC days are fun. However, they will not be the single determining factor on whether a trader is profitable.
- If a trader decides to trade the FOMC, they should consider trading with 20% of their normal position size. This ensures they are trading appropriately small, compared to the risk.
- As always, most traders should consider waiting for 6-12 bars before placing a trade. Reversals are common on the open, and it is best to avoid them unless one is excellent at limit order trading, which requires quick decisions.
- Most traders should try and catch the opening swing that often begins before the end of the second hour. It is typical for the opening swing to start after the formation of a double top/bottom or a wedge top/bottom.
Yesterday’s Emini setups
Al created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The EURUSD retested the October 23rd close yesterday. However, there were more sellers at this price level, and the market sold off, forming a bear reversal bar.
- The bears are hopeful they will get strong follow-through selling today and test the October low.
- They hope buyers will be near the October 13th higher low. Next, the bulls will try to get a higher low double bottom, a major trend reversal.
- Overall, traders will pay close attention to the follow-through today and tomorrow to see how determined the bears are to break below the October low. More likely, the market will continue to go sideways.
Summary of today’s S&P Emini price action
Al created the SP500 Emini charts.
End of day video review
End Of Day Review will be presented in the Trading Room today. See below for details on how to sign up.
See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.
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.