Trading Update: Tuesday November 1, 2022
Emini pre-open market analysis
Emini daily chart
- The Emini has been in a tight bull channel for several bars and is so close to the 4,000 big round number magnet that it may be unable to escape that target’s gravitational pull.
- While the rally up to October 28 is strong and has open gaps, it still looks more like a leg in what will become a trading range that is within a larger overall trading range.
- The bears see the rally as a possible double top with the September 21 high. They want a selloff down to the October 13 neckline and a measured move down.
- So far, every breakout since October 13 has had a deep pullback, and the bulls lack strong consecutive trend bars except for the three-bar breakout ending on October 25.
- This is the early stages of a small pullback bull trend. When you see what looks like a leg in a trading range, but the leg is forming gaps, one must be cautious and think about the potential of a small pullback rally.
- The bears see the rally up to October28 as a wedge top (Oct 18, Oct 26). These bears want a two-legged selloff down to October 21 low.
- Traders will pay close attention to the next couple of days to see if the bulls will get stronger and get consecutive strong bull trend bars up to 4,000 or will the market continue to go sideways to down and develop more selling pressure.
- If a trader senses confusion right now, they are thinking correctly. This rally is strong, but there are problems with it looks like a leg in what will become a trading range. But the current rally up is also tight enough and forming open gaps. The open gaps increase the odds of a possible measured move test of the August 24 low.
Emini 5-minute chart and what to expect today
- Emini is up 40 points in the overnight Globex session.
- The Globex market has been drifting up in a tight channel since yesterday’s close and is getting close to Friday’s Globex high.
- Since the market is breaking above the October 28 high, traders should be open to the potential of profit-taking and a bear close today.
- Since the market is so close to 4,000, traders should not be in denial if the market rallies on the open.
- As always, traders should expect a trading range open, which means most breakouts will fail. Therefore, most traders should wait for 6-12 bars before placing a trade.
- Traders can also wait for a credible stop entry, such as a double top/bottom or a wedge top/bottom. They can also wait for a strong breakout with follow-through and bet on a second leg up.
- Traders should also pay attention to the open of the day as it will likely be a magnet all day, especially if it is in the middle of the day’s range.
- Lastly, the most critical thing is to remember what Al Says: “Price is truth”. This means one cannot be in denial of what the market is doing. If the market is forming a strong buy-the-close or sell-the-close open, traders need to find a way to enter the trend’s direction. If the market opens as a trading range, traders should assume all breakouts will fail until they are proven wrong.
Yesterday’s Emini setups
Al created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The EURUSD is testing the October 18 breakout point, and so far, the gap (blue line) is still open which is good for the bulls.
- The bulls see the past few bear bars as a pullback from the October 26 breakout bar.
- The bears see two legs up (October 4, October 26) and a double top. They want break below the September 28 low (neckline) and a measured move down. The problem with this argument is that the bull bars appear to be strong and closing on their highs which is a sign of strong buying pressure.
- The other issue for the bears is that the market has been in a bear channel on the daily chart since mid-2021. Channels usually evolve into trading ranges which means the odds favor a rally lasting several months so that the market cycle can evolve into a trading range.
- The market is also at the 1.0000 big round number, which is logical support to begin this process of evolving into a large trading range on the daily chart.
- Overall, traders should expect sideways to up over the next few months. Traders should expect a test of the October 26 close in the next few days or weeks as it was a reasonable buy the close bar, and it should let bulls out if they are willing to scale in lower.
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
- I will update at the end of the day.
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.