Trading Update: Friday November 4, 2022
Emini pre-open market analysis
Emini daily chart
- The bears got the minimum follow-through yesterday after Wednesday’s large bear breakout bar.
- The odds are that the market will have a second leg down to the October 21 low; but with an Emini bounce possible going above the November 2 high.
- While the bears have done an excellent job over the past week, traders have to remember that the market is still in a trading range, which means traders should expect the bears to become disappointed soon.
- Yesterday’s follow-through was good for the bears because it was not a bull bar. In other words, the bears did the minimum by getting a bear doji bar which is not ideal. If the market were truly bearish, traders would have aggressively sold the close of November 2 and November 3, which would have been another big bar.
- The reason traders should expect a small bounce is because the risk is getting big for the bears, and the downside is likely limited.
- Traders are confident of a second leg. However, they are uncertain how big the second leg will be. This makes traders hesitant to sell the close of yesterday’s close and look to sell higher.
- The market formed a wedge top on November 1, so the odds favor two legs down, and the current selloff is probably the first.
- The bears hope this current selloff is part of a double top with September 21 that will lead a selloff below the October 13 neckline of the double top. They want a measured move down to 3,100 and for the market to reach the bull trendline on the monthly chart (2008, 2020). It is a low probability that the market will go straight down to the trendline, but it is possible.
- The bulls see this selloff as part of a double bottom higher low with October 21, and they want a rally back up to the 4,000 big round number.
- The bulls likely need a double bottom before getting much of a rally, but the odds favor a test of 4,000 over the next couple of months.
Emini 5-minute chart and what to expect today
- The market is up 50+ points following the report released at 5:30 AM PT.
- The market has been in a trading range for most of the Globex session, and the report bar tested the top of the Globex trading range.
- As always, traders should expect a limit order market on the open and lots of sideways trading. This means most traders should wait for 6-12 bars before placing a trade.
- Traders can also consider waiting for a credible breakout with follow through betting on a second leg up, but as stated above, they need to be careful as most breakouts fail on the open.
- Traders can also consider waiting for a credible stop entry, such as a double top/bottom or a wedge top/bottom.
- Traders should also pay attention to yesterday’s high if it is a reasonable target for the market to reach today; if it does get it, it could remain an important price all day as the market decides on closing above or below it.
- Today is Friday, so weekly support and resistance are essential. The bears want a close below last week’s low, and the bulls want the opposite.
- Traders need to be mindful that because today Is the final day of the week, there is an increased risk of a surprise move up or down in the last hour or two of the week. So, if there is a strong breakout, traders cannot be in denial.
- Overall, there is a reasonable chance the market will rally on the open and test yesterday’s high. However, the rally will likely be limited, and the bulls will become disappointed today. Traders probably wanted to sell a pullback on the daily chart. The most important thing to remember is that “Price is truth,” as Al Brooks says. One can have their own opinion about what will happen, but one cannot be in denial if the opposite happens.
Yesterday’s Emini setups
Al created the SP500 Emini charts.
Here are several reasonable stop entry setups from yesterday. I show each buy entry with a green rectangle and each sell entry with a red rectangle. Buyers of both the Brooks Trading Course and Encyclopedia of Chart Patterns have access to a much more detailed explanation of the swing trades for each day (see Online Course/BTC Daily Setups).
My goal with these charts is to present an Always In perspective. If a trader was trying to be Always In or nearly Always In a position all day, and he was not currently in the market, these entries would be logical times for him to enter. These therefore are swing entries.
It is important to understand that most swing setups do not lead to swing trades. As soon as traders are disappointed, many exit. Those who exit prefer to get out with a small profit (scalp), but often have to exit with a small loss.
If the risk is too big for your account, you should wait for trades with less risk or trade an alternative market like the Micro Emini.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The bulls are trying hard to get a strong buy signal bar today, closing on its high. This would be a second entry buy on the daily chart and a double bottom with the October 21 low.
- This is disappointing for the bears, but it is still the first good-looking bull close since October 26. This means there will likely be sellers above, and the upside will be limited.
- Today is a reminder that the market is still in a trading range and that bears are scalping. If the bears were genuinely eager to sell here, the market would be racing down.
- The bulls still need to do more here, and today’s close could look very different than it does now (a big bull bar near its high).
- Today is a reminder that the market is still in a trading range, and the market will likely get above the October or September highs sometime in the next month or two.
- Overall, today will likely disappoint the bears. However, it will probably not close on its high, which would also disappoint the bulls.
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
- End of Day video will be released this week.
See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.
Trading Room
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.
