Trading Update: Wednesday October 19, 2022
Emini pre-open market analysis
Emini daily chart
- The bulls gapped up yesterday, and the market sold off from the opening session and closed around its midpoint. But bulls poor follow-through, and a disappointing bar being a reminder that the market is still in a trading range environment.
- The bears see yesterday’s gap as the second leg from the October 13 breakout and a test of the October 5 high.
- The bears want yesterday to be a signal bar for the double top (October 5) and for the market to break below the neckline (October 13) and fall for a measured move below the 2020 Pre-Pandemic high.
- The probable with the above argument for the bears is that the market is already down 22% on the year and may not fall much further. Also, the measured move from the October 5 high to the October 13 low would take you more than 100 points below the 2020 Pre-Pandemic high. If the market falls below the Pre-Pandemic high, there will likely be value bulls buying aggressively, limiting the downside.
- More likely, the daily chart is in a trading range, and the odds favor more sideways price action.
- Overall, the odds favor higher prices and a test of the 4,000 big round number over the next couple of months. Even if the market falls to a new low below October 13, the odds will still favor a failed breakout and a test of the 4,000 big round number.
Emini 5-minute chart and what to expect today
- Emini is down 37 points in the overnight Globex session.
- The overnight Globex session has been in a bear trend. However, there have been strong moments of buying pressure which increases the odds of this being a bear leg in what will become a trading range more likely than a continued bear trend.
- At the moment, the bears are trying to break below yesterday’s session low, and the bears might be successful.
- While the selloff in the Globex session looks like a leg in a trading range, the channel down is tight and has open gaps (1:30 AM PT low and 5:15 AM PT high). Traders have to be cautious because that gap can lead to a measured move down.
- As always, on the open, traders should be cautious and not be too eager to trade. The open has frequent reversals, so traders should consider waiting for 6-12 bars to avoid getting trapped on the wrong side of the market.
- Traders can also wait for a credible double top/bottom or wedge top/bottom before looking for a good swing trade.
- Lastly, traders should be open to some opening reversal days. This is because the market does not typically trend from the available days in a row, which increases the odds of a trading range lasting all day or most of the day.
Yesterday’s Emini setups
Al created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The bulls are continuing to be disappointed with every rally.
- Right now, the market is forming a triangle over the past month.
- The bulls need to get above a credible major lower high (September high) to convince traders that the market is no longer in a bear trend.
- Right now, the market is clearly in a trading range, and the bulls are starting to get multiple closes above the moving average, which is a sign of strength.
- The bears are trying hard to get a second leg down from the 5-bar bear micro channel that began on October 10.
- The odds still favor a second leg up and a test of the October 4 close due to trapped buy-the-close bulls. Some of the bulls who bought the October 4 close scaled in lower and used the past couple of trading days to exit breakeven on the entire trade, which is partly why the market is selling off today.
- Overall, the market is still in a trading range, and until one side gets a clear breakout, the probability is close to neutral but slightly favors 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
- Video update will be release 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.
Could you consider the buy CX b7 – b12 to be the second leg up of the strong opening BL b1? Was it reasonable to expect a second leg up from the buy CX; and if so, did BL b14 qualify (if so, why)?
The rally up to bar 12 was a type of 2nd leg trap where the first leg was bar 1. Although the rally up to 12 was strong, it was a parabolic wedge (8,10,12) which increased the odds of a pullback. Also, the bears were able to get strong selling pressure on bars 2-4 which increased the odds of sellers above.
The bulls failing to get a second leg up after bar 12 was a lot of probability event and should not have happened, which is why the market had the selloff down to bar 44 (trapped bulls).
Trading range open, though, so important not to buy too high or sell too low.