Trading Update: Wednesday October 25, 2023
S&P Emini pre-open market analysis
Emini daily chart
- The Emini is stalling at the October 6th low. The bulls are trying to create enough buying pressure to force the bears to give up on the idea of another leg down.
- The bears believe the recent three-bar breakout is strong enough for a second leg down.
- The odds favor a second leg down and a test of the 4,200 and the midpoint (4,172) of the rally that began in October 2022.
- It is that the market is forming a wedge bottom with August 18th, October 6th, and the final leg down being the current leg down.
- The bulls who bought the rally up from the October 6th low are trapped in a losing trade due to the recent selloff. Some of those bulls are still long, deciding what to do. At the moment, the odds favor those bulls selling out of longs on any bounce and the market getting a second leg down.
- However, if the market goes sideways and develops more bull bars, closing on their high, the bulls may hold onto the longs for a test of the October high.
- Lastly, yesterday formed a Low 1 sell signal. However, it is a bull bar at support, which increases the probability of buyers below and sideways trading for a day or two. This means traders should pay attention to yesterday’s low as it will probably be a magnet.
Emini 5-minute chart and what to expect today
- Emini is down 15 points in the overnight Globex session.
- The Globex market has been in a tight trading range for the past several hours. This means the market is in breakout mode going into this morning’s open.
- Traders should be cautious about trading the first 6-12 bars as it often has several reversals. Most traders will be better off if they avoid trading during this time unless they are quick to make decisions.
- There is an 80% chance of a trading range open and only a 20% chance of a trend from the open.
- Yesterdays formed a Low 1 on the daily chart. This means that yesterday’s low is a magnet and will probably act as support if the market gets down to it.
- There is at least an 80% chance of an opening swing that will often begin before the end of the second hour. Most traders should focus on catching the opening because of the excellent risk reward it often provides.
- It is common for the market to form a double top/bottom or a wedge top/bottom before the opening swing begins. This is because the market often forms a trading range open, and thus, one of the patterns mentioned above will often develop before there is a breakout.
- Traders should expect today to have a lot of trading range price action and disappoint both the bulls and the bears.
Emini intraday market update
- The Emini gapped down and sold off with a bear trend from the open.
- The bears triggered the Low 1 short on the daily chart by falling below yesterday’s low.
- Because yesterday was a bull bar and a bad Low 1 short, it was reasonable to assume that the opening selloff was a possible sell vacuum test of support.
- The selloff on the open is large enough that today is unlikely to become a bull trend day. This means the current reversal up is more likely a leg in trading range, and not the start of a bull trend.
- Traders will probably have a lot of trading range price action over the next several hours.
Yesterday’s Emini setups
Al created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The Bulls recently got an upside breakout two days ago. However, they failed to get follow-through, and traders sold aggressively. This created a two-bar reversal yesterday.
- The bull breakout on Monday is a classic example of a second leg trap in a tight bear channel. One can also call it a failed bull breakout of a triangle, which was the recent tight trading range lasting several bars.
- The bears will try and get a strong entry bar after yesterday’s two-bar reversal.
- Traders will pay close attention to see what kind of follow-through selling the bears can get.
- Because of all of the recent bull bars over the past month, there is an added risk of the bears getting trapped and the bulls getting up upside breakout. However, the bulls need to first prevent the bears from getting strong follow-through selling.
Summary of today’s S&P Emini price action
Al created the SP500 Emini charts.
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.
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.