Emini Bulls Disappointment Likely Soon

Trading Update: Tuesday November 8, 2022

Emini pre-open market analysis

Emini daily chart

• The market is trying to reverse the November 2 surprise bear breakout. However, the odds still favor a second leg down, which means Emini bulls disappointment likely soon.
• The market is in a trading range, so the pullback could be deep and test the November 1 low before the bears get their second leg down.
• Some bulls got trapped on the November 2 downside breakout, and they are deciding how disappointed they are.
• While the market may test the November 1 high before a second leg is down, it is unlikely.
• The market formed a wedge top with the rally ending on November 1, so the odds favor a second leg down.
• The bears hope that the second leg down will be significant and further trap the bulls into losing positions. If this happens, more bears will agree that November 1 is a double top with the September 21 high. Those bears want a breakout below the October 13 neckline and a measured move down.
• More likely, the second leg down will be brief, and the market will continue sideways. Ultimately, the odds favor a rally testing the 4,000 big round number. This is because it has been a strong magnet all year and will likely continue to be necessary.
• Traders should be mindful that the market may have to reach the October 21 low and form a double bottom higher low major trend reversal before the bulls can get a rally testing the 4,000 considerable round number.

Emini 5-minute chart and what to expect today

• Emini is up 15 points in the overnight Globex session.
• The Globex market has been in a trading range for most of the overnight/morning session.
• The market will likely have a lot of trading range price action on the open and possibly all day.
• The market was right around a 50% pullback (3,815 area) of the three-day selloff last week. This will be an area of resistance, and traders should be mindful of the possibility of sellers and a start of a second leg down. This increases the risk of bulls becoming disappointed today.
• As always, traders should expect a lot of limit order trading on the open and not be in a rush to trade. Most traders should generally wait for 6-12 bars before placing a trade to avoid being burned by multiple reversals.
• A trader can also consider waiting for a stop entry that forms after a double top/bottom or a wedge top/bottom.
• Lastly, as Al often says, traders must trade the chart in front of them, not what they hope will happen.

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 have created a strong rally over the past two trading days. The two-bar bull breakout is strong enough to expect a second leg up, so traders will likely buy the first pullback.
• The bears want to create a strong reversal bar today or tomorrow and trap the eager bulls betting on the breakout. They want the breakout to form a double top with October 27, break below the November 3 neckline of the double top, and go down for a measured move.
• The bulls want the opposite and a breakout above the October 26 high and rally for a measured move up, testing the August high.
• Overall, the odds favor a rally lasting at least a few months. The bears have had a bear channel on the daily chart for over a year and a half. Bear channels typically convert into trading ranges, which means a rally lasting several bars, and a couple of legs will be needed at a minimum to convert the market into a trading range.

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 a bull trend from the open that led to a lower high major trend reversal.
• The market formed a lower high major trend reversal following the parabolic wedge top.
• The sell-off was strong following lower high major trend reveals. However the sell-off was so climactic which increased the odds of the reversal at the open of day.
• The opening rally was also big, which reduced the odds of the bears collapsing far below the opening range.
• End-of-day video to follow 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.

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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.

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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.

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