Trading Update: Wednesday January 4, 2023
Emini pre-open market analysis
Emini daily chart
- The Emini yesterday went outside down; however, it rallied late in the day creating a big tail below the bar. Bulls want inside bar today.
- The market may try and form the inside bar today, creating an ioi pattern on the daily chart and a second entry buy.
- Yesterday is a reminder that the market is still in a tight trading range and breakout mode.
- The bulls still want the past few days to form a higher low major trend reversal and test back to the December 13th high. At a minimum, the bulls want to get back to the December 6th low, which was the bottom of a month-long trading range.
- Bulls got trapped buying the bottom of the month-long trading range, and they expect a retest to allow them to break even back at the December 6th low with a profit on their scale in.
- The bears want the nine days to be a pullback that leads to a more significant second leg down, testing the November lows.
- Overall, the bulls want the market to form a higher low major trend reversal: a head and shoulders bottom (left shoulder is June 17). The bears want the market to fall below the October 13th low. If the market does fall below the October 13th low, bulls will look for a possible wedge bottom with June 17th and October 13th.
- Most traders should be patent here. Everybody knows a breakout of the 9-day tight trading range will happen; however, it is best not to be too eager and wait to see the breakout with follow-through.
Emini 5-minute chart and what to expect today
- Emini is up 20 points in the overnight Globex session.
- The Globex market has been in a tight trading range for most of the Globex session.
- One can also argue that the market is still in a bull channel since late yesterday.
- While the market will probably have at least a small gap up on the open, traders should assume the day will mostly go sideways and try and form an inside day with yesterday’s range.
- As always, traders should assume the open will have a lot of sideways movement and consider not trading for the first 6-12 bars.
- On the open, the bars are typically big, and the market can reverse quickly. Look at yesterday’s (January 3rd) bar 4, for example. The market rallied on the open, and bar 4 completely reversed the first two bars of the day.
- Most traders should be cautious on the open. It is easy to lose money, and since the breakouts are big, one can descend into a big hole for the day and not make it up before the end. Also, the range typically contracts as the day goes on, making it harder to make up early morning losses.
- Since at least 80% or more opens have a good swing trade lasting 1-2 hours, traders need to look for potential swing trades. One way to do this is to look for a double top/bottom or a wedge top/bottom on the open. This is because it is common for a swing trade to happen after one of these patterns forms.
- Important to note that the FOMC meeting minutes are issued today at 11:00 AM PT. This means that the market may go sideways leading up to the report.
- When the report is released, traders should wait for the 2nd bar to close before placing a trade. FOMC reports often reverse quickly and one can take a big loss if they are not careful.
- Also, since FOMC bars are often big, it is essential to trade very small after the report. In general, trade 20% of your normal position. If one cannot trade small, step aside and wait. There will always be opportunities later.
Emini intraday market update
- The first six bars had a lot of overlap, which was a sign that the open was going to be mostly a trading range day.
- The bears got a big outside down bar at 7:05 AM PT; however, the follow-through was disappointing, and the market reversed the bar.
- AT the time of writing this 8:15 AM PT, the market is testing the open of the day and possibly forming a wedge top.
- The 7:05 AM PT breakout bar is big enough to make the market more likely a trading range, even if it goes above it.
- The bears are trying hard to form a wedge top around the day’s open and make the market go sideways.
- Traders should assume the market will continue to have trading range price action going into the FOMC report at 11:00 AM PT.
- When the FOMC report is released, traders should wait for the bar after the FOMC bar to close, taking a position. It is common for the FOMC bar to be a big trend bar up or down, and for the next bar to completely reverse the FOMC bar.
- Remember to trade small on the FOMC. When in doubt, trade 20% of your normal position size. If you cannot trade small, wait for the next day.
Yesterday’s Emini setups
Brad created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The EURUSD finally reached the moving average yesterday after testing the measured move target (purple line) above the prior day.
- Yesterday’s bar is a big enough surprise to increase the odds that the bears will probably get a second leg down and at least make the market go sideways.
- The bulls hope that yesterday is a second leg trap that traps the bears into selling a failed breakout (January 3rd).
- Yesterday was the first opportunity traders have had to buy at the moving average in over 30 bars, which means traders will buy.
- Bulls buying at the moving average are likely buying for the scalp, though not for a new high above January 2nd.
- Traders will pay close attention to today’s close. If the bar closes on or near its high, it will increase the odds that the bulls will be able to trap the bears and get a new high. If today’s bar sells off into the close, it will increase the odds that the market will get a second leg down.
- Even if today’s bar closes on its high, traders will still be suspicious and wonder if the bears need a second leg down.
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
- I will update at the end of the day.
See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.
Al Brooks and other presenters talk about the detailed Emini price action real-time each day in the BrooksPriceAction.com trading room. 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.
I am curious about the reference to the bulls being trapped and wanting to get back to Dec 6th bottom to break even. IF they were trapped there, Dec7-15 would have been plenty of exit time. – 12.15 looks like many bulls exited as it went to Dec 6th low. I would think Dec. 16 is where that range got trapped, but many exited also(?) as bulls gave up. A gap down would have trapped more. And we have been in a 10 day trading range since the three bear bars down (12-15,16,19). Is that correct? I am new so pardon my ignorance. Comments? -Jason