Trading Update: Wednesday October 12, 2022
Emini pre-open market analysis
Emini daily chart
- The bulls tried to get a strong buy signal bar closing on its high yesterday after failing to break below the September 30 low. However, the market reversed down late yesterday, forming a doji bar.
- The bulls want strong buy signal bar today for a failed breakout below the September 30 low.
- Yesterday was a disappointment for both the bulls and the bears, which signifies more trading range price action to follow.
- As strong as the bears have been over the past four trading days, the bulls will probably disappoint the bears soon, and the market will have a rally at a minimum back to the apex of the two-week trading range and the 3,700 big round number.
- The bears will see any rally as a pullback from the June 17 breakout and look to sell any bounce.
- While the bears still have a credible shot at getting the breakout below the June 17 low, they are not doing what they need to do now. This means the probability favors the failed bear breakout and trading range price action.
- Overall, traders should expect a rally lasting a couple of legs up and testing the October 5 high. With the bears having a five-bar bear micro channel, the first reversal up will likely fail and lead to sideways trading. This means the bulls will probably need some double bottom before they can get a reversal up.
Emini 5-minute chart and what to expect today
- Emini is down 2 points in the overnight Globex session.
- The Globex market was been in a bull channel since yesterday’s late strong selloff, but sold off after 5:30am PT report.
- The bulls want the market to rally today, which led to a strong bull trend day, creating a strong buy signal bar on the daily chart.
- As always, traders should expect a trading range open and multiple reversals within the first hour. Most traders should consider waiting for 6-12 bars before placing a trade.
- Also, another reason for waiting for a few bars on the open is that the probability of the open is uncertain and unclear. One can reduce their risk of getting trapped in a bad trade by waiting for a few bars.
- At some point, the day will form either a double top/bottom or a wedge top/bottom, which usually leads to a swing traded. This means a trade can wait for the stop entry of one of these patterns before placing a trade.
- Traders should pay attention to the day’s open and be available to an early low of the day. The daily chart has four consecutive bear bars with weak momentum (bodies getting smaller). This increases the odds that the market will have a bull close today.
- Overall, traders should be open to the possibility of a bull trend today but assume trading range until proven otherwise. Lastly, one cannot be in denial of what the market is doing. If the day forms a strong sell-the-close market, traders must find a way to get short.
Yesterday’s Emini setups
Al created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The EURUSD is trying to form a second entry buy signal bar today for the higher low major trend reversal.
- The bears have a five-bar bear micro channel, and the first reversal up was likely to fail. Yesterday ended the micro channel, and the market went up outside.
- If today is a bull inside bar, that would be a more credible second entry buy setup on the daily chart.
- The bears will see any rally as a pullback from the selloff to October 10th.
- While the bears have been strong, the context is starting to favor the bulls. The context favors the bulls because the daily chart has been in a bear channel for over a year, and they probably will begin to select a rally and form a trading range.
- The rally up to October 4 was strong and likely to be followed by a second leg up.
- Also, October 4 was a credible buy-the-close bar and bears never had the chance to exit breakeven back at the October 4 close once they were disappointed with October 5. This increases the odds that the market will return to the October 4 close soon.
- Overall, the bears hope this current selloff is a double top with September 20; however more likely that the market will go sideways to up over the next couple of weeks.
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
- Today was a trading range that lasted all day.
- The market had a strong rally on the open; however, after the big bar 1 bear bar, traders were cautious about buying the bar 2-3 consecutive bull bars. Also, the open has frequent reversals.
- The market sold off and formed a wedge bottom, leading to a higher low double bottom around 7:45 PT. This led to two legs up and a test of the bar 3 high.
- The market sold off from around 9:15 and formed a spike and channel that led to a wedge bottom around 11:00.
- The bulls tried to get a strong upside breakout around 11:15, but they failed, and the market reversed down after two legs up.
- Overall, today was a trading range day with lots of two-three legged moves that reversed. It is important to understand that moves within a trading range typically do not last that long and reverse after two-three legs in that direction.
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.
How do you buy above bar 39, a tiny doji reversal bar? I get that there’s a wedge, but the signal bar is so weak compared to the other bars on the chart. Is it a function of the market being in a fairly tight trading range the entire day? I find that if I react to these tiny bars, I end up making quite a few mistakes.
I don’t understand why Brad is always looking for buy setups
> If the day forms a strong sell-the-close market, traders must find a way to get short.
It looks like we’re dumping tomorrow
yes, it’s commons sense
Quick question: At what point in the day should it have been obvious it was likely to be a trading range all day. I understand there is no perfect answer here – but perhaps Bar 16?
I think it was trading range because CPI tomorrow. Usually market hold until CPI are released.
Overnight price action constantly moves up and down so I figured we would be in TR the whole day.