Trading Update: Wednesday August 24, 2022
Emini pre-open market analysis
Emini daily chart
- The market had a bear close yesterday, but it was a doji close near the open of the day.
- This is a sign of loss of momentum by the bears and increases the odds that the market will bounce soon and bears will be disappointed. The bounce will probably go above the August 22 bear bar and test into the gap above around 4,200.
- Emini bulls want rally up to 4,200.
- The bears will sell any pullback expecting the market to stay below the August 16 high and form a lower high.
- Bulls want the market to reverse here, but after a 6-bar bear micro channel, the odds favor sellers above.
- The rally up to the August 16 high was strong enough that the odds favor a higher low soon, but what traders do not know is how deep of a pullback bulls will get. The market could reach the 4,000 big round number before the bears can form a bottom. Trading ranges often have pullbacks deeper than traders want and are usually strong enough to make traders question whether this is a pullback or a reversal.
- The reality is that the market has been in a trading range for several months and the current selloff is a likely leg in a trading range. This means that even if the bears reach 4,000, it would be a 50% pullback for the bulls, and the market would likely bounce there.
- The bears have done a decent job over the past few days, but they need to do more here and get a bear breakout similar to June 9.
- More likely, the bears will be disappointed today or tomorrow, and the market will have a bounce over the next day or two, which would add further confusion to the market.
- The selloff is good for the bears but not good enough to sell closes yet, and the channel down is tight enough that the first reversal up will likely fail. The market will probably go sideways around the 4,300 – 4,100 price level.
- Another thing to point out is that the market may have to fall below the August 9th low before buyers come. It is a higher low and the start of an exhaustive rally up to August 16. One could also make the same argument for August 2 and 5.
- Overall, the market will probably test the 4,000 big round number soon. It is in the middle of the trading range and an important magnet. As I said above, the market may have to go sideways first and bounce before it reaches 4,000.
Emini 5-minute chart and what to expect today
- Emini is up 2 points in the overnight Globex session.
- The Globex market has been in a trading range for most of the overnight session.
- As I stated above, today will likely have a bull close and disappoint the bears.
- Most traders should be patient on the open and wait for 6-12 bars before placing a trade.
- The day is likely to be a trading range open, so there will likely not be a rush to enter a swing trade on the first 6 bars of the day.
- If the day is going to become a bull trend day, there will be plenty of time to enter the trend.
- It is important on the open to be patient and not try and force trades. There are usually several reversals, and the breakouts typically fail within a few bars.
- Traders can also consider waiting for a stop entry such as a double bottom/top or a wedge bottom/top.
- Lastly, traders should pay attention to the open of the day as it will likely be a magnet for most of the day.
Yesterday’s Emini setups
Al created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- Yesterday was a bad follow-through bar after the August 22 bear breakout below the July 14 low.
- August 22 was a climactic bar which increased the odds of buyers yesterday as bears to profits and bulls bought yesterday’s open for a scalp.
- The bears have had a 5-bar bear micro channel within a larger tight channel since August 10.
- The bears will likely be disappointed soon, and the market will probably get a pullback.
- While the odds favor the 2nd leg down from the selloff that started on August 10, the market is at major support, the 1.000 considerable round number, and the July 14 low.
- The market will probably disappoint traders soon and form a deep pullback letting the scale in bulls who bought the July 27 low and lower, get out back at the July 27 low. This makes me think the pullback here will be deep enough to create traders to agree that the market is in a trading range and that the selloff down to August 22 will be a failed breakout.
- The channel down is tight, so the bulls probably need at least a micro double bottom before traders are willing to buy for a swing. This means the best the bulls can do is sideways here for at least a few bars.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Al created the SP500 Emini charts.
End of day video review
- I will upload video over the weekend.
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.
A have question about the 24/08/22.
Can I say that from bar 16, perhaps more specifically from bar 21, the market was in a small pb bull trend? I had this assumption, but after the breakout of bars 39 and 40 – which for me were surprise bars – I didn’t consider this assumption.
I was also assuming 21 as a possible projection gap, but apparently we only had a vacuum until HOY resistance.
Thank you for the report!
Bar 16 – 20, the market was getting a breakout in terms of time and not price. What I mean is that the bulls were getting a close above the prior bar and forming a microchannel but could not get close on highs. This was a warning that the bulls may get an upside breakout. Bar 21 was strong, and the odds favored a channel which was bars 22 -29.
Bar 29 was a buy climax and exhaustion that led to an endless pullback and ultimately a bear breakout on bars 38-39.
The problem with the rally was that it was not sustainable. Take away bar 21, and there were no strong breakout bars except for bar 29, which was the third push-up after the bar 21 breakout.
This is common, though, where you get a breakout and vacuum test of resistance such as the previous day’s high.