Trading Update: Friday December 30, 2022
Emini pre-open market analysis
Emini daily chart
- The daily chart yesterday reversed the outside down bar on Wednesday and closed on its high. Although the market is in a tight trading range, it is a reasonable buy after yesterday, and Emini bulls need strong entry bar today. This means some bulls will front-run and enter on a pullback anticipating that the market will trigger yesterday’s buy.
- The market continues to stall at the 50% pullback of the 2-month rally that led to the December high.
- The bulls are trying to form a bottom and a higher low. Next, the bulls want a test of the December 6th trading range low, and ultimately, they want a breakout above the December 13th high.
- More likely, since the daily chart is a trading range, traders should expect any rally to disappoint the bulls, just like the follow-through after the six-bar bear micro channel ending on December 21st has disappointed the bears.
- The bears want the market to break out below the 9-day tight trading range and test the November low.
- The bulls have done an excellent job of developing buying pressure after the six-bar bear micro channel; however, they need to get consecutive strong closes to convince traders that the market is going back into the December trading range.
- Yesterday was another buy signal at the 50% pullback of the 2-month rally.
Emini 5-minute chart and what to expect today
- Emini is down 25 points in the overnight Globex session.
- The Globex market is attempting to form an endless pullback after yesterday’s strong rally.
- The market is just under a 50% pullback of yesterday’s range and will probably find support around this price level.
- Bears got trapped during yesterday’s upside breakout and will likely use this current selloff to minimize and open losses.
- Bulls will see this current selloff in the overnight market as an opportunity to buy for a second leg.
- The bears hope to continue the overnight tight channel down; however, it will likely evolve into a trading range. This means sideways to up is likely during today’s session.
- Because of the above reasons, traders should be open to a possible early low of the day.
- The bulls want a strong bull trend day today. If the bulls get a strong bull trend today, there will be obvious signs of it, such as consecutive strong bull trend bars and a lack of selling pressure.
- As always, traders should assume the open will have a lot of trading range price action (limit order market). This means traders should consider not trading for the first 6-12 bars unless they are comfortable with trading range trading.
- Traders can always wait for a clear breakout with follow-through or a credible stop entry, such as a double top/bottom or a wedge top/bottom.
- With today being the year’s final day, traders should be open to anything, especially a surprise move late in the afternoon.
- Today is also the final day of the week and the month. Institutions may change their holdings going into the end of the year and quarter, so traders should be open to anything. This will increase the risk of a surprise move late in the day.
- The single most important thing is to be open to anything. One must trade based on what the chart tells them, not what they hope the market will do. If the market is clearly in a trend, find a way to enter, even if it is a small position. If the market is in a trading range, trade it like a trading range until there is a clear breakout.
Emini intraday market update
- Market gapped down, and bar 1 was a big bull bar. This increased the odds of the open going sideways.
- The selloff to bar 4 was disappointing, big enough that there would likely be sellers back at the bar 1 high.
- With the rally on bar 1 and the selloff to bar 4, the odds favor a trading range for several hours.
- At the time of writing this 8:00 AM PT, the market rallied back to the bar 1 close during 7:50 AM PT and formed a wedge top.
- The bears got a two-bar reversal at 7:55 AM. The market is currently trying to reach the bar 4 bear close. As climactic as bar 4 was, it was reasonable to sell the close of the bar, therefor, the market may have to test the bar 4 close.
- Some bears who sold the close of bar 4 may sell more below the 7:55 AM bear reversal bar and try to exit breakeven on the entire trade.
- Overall, traders should expect sideways for the next couple of hours and a possible test of the bar 4 close.
Yesterday’s Emini setups
Brad created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The EURUSD continues to go sideways in a tight trading range, just above the moving average.
- The market has been above the moving average for over 30 bars which is climactic behavior.
- The market is so close to the moving average that traders are hesitant to buy here. They do not want to buy if the odds favor the market, at least touching the moving average.
- The bears want this tight trading range to become a final flag and lead to a reversal down.
- The rally up from the December high is a breakout on a higher timeframe. The bull will try for a second leg up after any pullback.
- Traders should also be open to the market breaking below the moving average and testing the November 21st low, which is the start of the channel.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Brad created the SP500 Emini charts.
End of day review
- Today, the market formed a triangle, which is a contracting triangle for half of the day.
- Bar 1 was a big bull bar after a gap down. This was a sign that the market was rejecting the gap down on the open. However, the gap down was strong enough for a second leg down.
- Bears sold below bar 2, betting the market would get a second leg down from the gap.
- Typically, if the day is going to be a strong bear trend day, there should not be much buying pressure. Bar 1 is too much buying pressure for today to be a bear-trend day likely.
- Although bar 4 broke far below bar 1, it is a large sell climax bar. Typically sell climax bars lead to sideways to up trading, which is why bar 5 reversed up.
- After the rally back to the bar 1 close during 9:50 AM Central Time, the market was in a big up, big down, a market which means breakout mode. At this point, traders should be careful not to buy too high or sell too low and wait for a clear breakout.
- The bears got a downside 2 bar breakout at 9:25. However, the market reversed up from the bar 4 low with a strong bull buy signal bar at 12:30 PM Central Time. This created a second leg trap that went sideways for several bars before reversing up, forming a strong buy-the-close rally.
- The Bear Breakout down to 12:25 PM Central Time was a strong enough breakout to make the market go sideways, which lowered the probability of a sharp reversal up at 12:30.
- The selloff down to 12:25 was a second leg down from the gap down on the open and a 2nd leg trap. Generally, when the market fails to go in one direction after it has been in a triangle, it will try to go in the other direction. This means a logical target for the bulls is the apex (middle) of the 4-hour triangle.
- The rally that tested the apex of the triangle (around 14:20 PM) was strong enough for a second leg, so traders would continue to buy into the close.
- The market failed to break below yesterday’s Thursday low and reversed up. The daily chart is still in a tight trading range; however, it is developing more buying pressure. This increases the odds of a rally back up to the December 6th low soon.
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.
Thanks Brad! Happy New Year!