Trading Update: Thursday October 13, 2022
Emini pre-open market analysis
Emini daily chart
- Emini bears downside breakout overnight, and bears now have a 6-bar bear micro channel. The market is beginning to collect bear bars closing below midpoints under the June 17 low.
- The bulls keep trying to reverse the market up but failing. This led to an overnight successful breakout below the June 17 low and a possible measured move down to the 2020 Pre-Pandemic highs.
- The 6-bar bear micro channel increases the odds that the first reversal will fail, giving bears confidence to sell a pullback.
- The problem the bears have is that it is not clear that they have won. This increases the risk of the market going sideways here, but if the bears continue to collect bear bars closing below their midpoints, the market could sustain a major downside breakout.
- Most bulls will not be eager to buy the first reversal up after five consecutive bear bars in a row, all closing below their midpoints.
- The bulls would rather wait for a credible strop entry and will likely need some second entry to buy or a strong upside breakout in the form of 2-3 strong bull bars.
- The bears have a large downside breakout and they need to capitalize on it. Otherwise, the market will likely go sideways and reverse back up.
- Overall, traders should expect the bears to be disappointed with a bull close today but be prepared if the bears get another strong close today. The downside breakout is still the lower probability, but the bears’ probability increases with the 6-bar bear micro channel.
Emini 5-minute chart and what to expect today
- Emini is down 80+ points in the overnight Globex session.
- The market had been going sideways to up before the 5:30am PT reports, after which a 140 point selloff occurred.
- The bulls wanted a gap up and a strong bull close today, ending the bear streak on the daily chart, but unlikely to happen.
- As always, traders should assume a trading range on the open and wait for 6-12 bars before looking to place a trade. This will help traders avoid reversals on the open.
- Traders can also consider waiting for a credible stop entry, such as a double top/bottom, or a wedge top/bottom/
- Lastly, traders should pay attention to the open of the day as the market will likely close above it today. This means that traders will look to buy below the open as long as the market is not in a clear bear trend.
Yesterday’s Emini setups
Al created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The bulls are still trying to get the reversal up. However, yesterday was a bad second-entry buy.
- The odds still favor a second leg up and a test of the October 4 close. The Buy the close bulls (October 4) never had a chance to exit at breakeven after the disappointment bar (October 5).
- Also, the odds favor the bulls forming a trading range and going above the September highs ending the bear trend on the daily chart.
- The bears have been in a bear channel since the middle of 2021. Channels eventually evolve into trading ranges, meaning the bulls should get a rally up to the last major lower high.
- The bears have a tight bear channel from the October 5 selloff, making bulls less willing to buy without more buying pressure developing. The bears hope the rally will lead to a lower high below October 5 and a selloff below the September low.
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 an strong bull-trend day with a range of 5.5% overall.
- The market gapped down following the 5:30 AM PT report, and the day formed a strong bull trend from the open bull trend day.
- The bears tried to develop selling pressure around 7:15 PT, but the opening rally-up was too tight, and the market led to an upside breakout that formed a parabolic wedge top around 8:45.
- The market formed a bull channel lasing the rest of the day.
- Today was so climactic that the market may have to pull back for a couple of days before the rally can continue higher.
- Overall, today was a very strong bull-trend day, which may be the low for the rest of the year.
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. Al talks about the detailed S&P Emini futures price action real-time throughout the day in the BrooksPriceAction.com on trading room days. 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.