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.