Trading Update: Wednesday December 7, 2022
Emini pre-open market analysis
Emini daily chart
- The market reached the November 30 low and the November 1 high yesterday, which were both likely to get tested.
- While the bears have done an excellent job over the past few days, the odds favor a pullback lasting at least a day or two, with Emini bears likely taking partial profits.
- At the moment, the bears have a four-bar micro channel which is good for the bears and increases the odds that the first reversal up will fail and lead to a second leg down.
- The bears want the current four-day selloff to be strong enough to lead to a breakout below the November 1 high and test the November 9 or November 3 low.
- The bulls will see any selloff from here as a pullback in a broad bull channel. Even if the market returns to the October 21 low, the bulls will see it as a double bottom higher low major trend reversal.
- The most crucial thing to remember is that the market is in a trading range, which means the moves up and down can appear very strong and fail after a brief period.
- Traders should still be mindful of the 4,000 big round number at the end of the year. The market has spent much time at this price level during the year, so traders need to wonder if the market will try and close the year around 4,000.
- Overall, traders should be open to the bears getting a second leg down; however, since the market is in a trading range, the market could reach 4,000 before the bears get their second leg down.
Emini 5-minute chart and what to expect today
- Emini is down 8 points in the overnight Globex session.
- The market broke out below yesterday’s low after going sideways for most of the overnight session and is now reversing up. Bulls will see this as a final flag reversal pattern. They will buy, hoping for a bull trend day during the U.S. day session.
- The bulls have a reasonable chance of a bull trend day as the bears take partial profits on the daily chart and the bulls buy for a scalp. This means traders should pay attention to the buying pressure on the open and be mindful of a possible early bull trend today.
- Since the market has had two small pullback bear trend days in a row, the odds favor today being a trading range day and not a trend lasting a day.
- It is possible the bulls could get a strong rally for the first couple of hours that converts into a trading range for the rest of the day.
- As always, traders should assume the market will have a trading range open. This means traders should expect a lot of limit order trading and consider not trading for the first 6-12 bars today.
- Traders can also wait for a credible stop entry in the form of a double top/bottom or a wedge top/bottom.
- Overall, traders need to remember that “price is truth.” This means one cannot deny what the market is doing, no matter what they think it will do. If the market is going up strongly, traders must find a way to get long. If the market is racing to the downside, traders must find a way to sell.
Yesterday’s Emini setups
Al created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The EURUSD is forming a wedge top, and the bulls are trying to break above it and reach the measured move target above (1.0697). The market may have to reach the measured move target before the channel that began on November 21 converts into a trading range.
- While the bulls have a decent amount of buying pressure since the November 10 and 11 bull breakout, the bears have done enough to make traders question how long the channel that began November 21 will last.
- The bears are getting decent selling pressure. However, they likely need more selling pressure before many bears are willing to sell below bars for a swing.
- At the moment, the odds favor higher prices, even if the market has to pull back for a few legs first.
- If the bears can continue to develop more bear bars closing below their midpoints, the odds will increase that the market will return to the November 21 low.
- Overall, the market is in a tight bull channel. While the bears make money selling above bars, most will hesitate to sell below bars until the bears have developed more selling pressure. This means the odds favor more sideways over the upcoming days.
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 formed an opening reversal that led to a bear trap, which followed a triangle.
- The first four bars of the day were a clear sign that the market was likely to remain a trading range day for most of the day.
- When you get a frequent reversal on the open, it is essential not to be too eager to bet on breakouts since most breakouts of trading ranges fail.
- In general, on a trading range day like today, it is usually better to wait for a two-legs down or a wedge bottom and look to buy in the bottom one-third of the range. The opposite goes for the top of the range; better to wait for a two-legged rally or a wedge top and only look to sell at the top of the range.
- The most important thing to do in a trading range market is to avoid trading in the middle of the range as it has the weakest trader’s equation.
- Lastly, because most breakouts fail in a trading range, traders must remember to take profits quickly. Otherwise, the profit will disappear.
- I will post an End-Of-Day video review soon.
End of day video review
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.
EOD video review added…
Graet job, thank you Brad