Trading Update: Friday October 14, 2022
Emini pre-open market analysis
Emini daily chart
- Yesterday was a very good day for the bulls, with follow-through needed today, which might be the year’s low.
- While the odds favor a second leg up yesterday’s bull breakout, the bar is so climactic that the market may have to pull back first before the second leg up.
- The bulls want today to have a follow-through bar closing on its high, which would sign eager bulls to buy after yesterday’s climactic bar.
- The bears should not have allowed yesterday’s breakout bar to happen, and this bar will likely confirm that the market is in a trading range or a bull trend.
- The market also came within two points of the 3,500 big round number. Investors saw yesterday’s opening selloff as a great area to establish long positions and a deeply discounted prince. These bulls will also be happy to buy at the 2020 Pre-Pandemic high if given the opportunity.
- The bears hope that this bar will be a pullback. However, most bears will not be willing to sell until a few legs are up at a minimum.
- The bulls will begin to buy; there might be more traders interested in buying a 50% pullback of yesterday instead of above yesterday’s high. This means the market may pull back for a few days.
- The bulls want the market to rally and test back up to the September 6 low and the 4,000 big round number.
- Today is Friday, so weekly support and resistance are important. The bulls want a parabolic wedge over the past two months and a failed breakout of a larger wedge bottom that ended on June 17.
- The bulls want another bull trend bar today, which would create a buy signal bar closing on its high on the weekly chart.
- The bears want today to have bad follow-through and to close the market below the open of the week as a sign of bull weakness.
Emini 5-minute chart and what to expect today
- Emini is up 35 points in the overnight Globex session.
- The Globex market sold off during the early morning trading hours, testing the bottom of the two-day channel and forming a trading range.
- Traders should expect a limit order market on the open and be cautious about looking for breakouts.
- Most traders would be better off waiting for 6-12 bars before placing a trade. This is because the probabilities are usually closer to neutral on the open, and there is a greater risk of reversals after breakouts.
- Often, the market will form a swing trade by creating a double top/bottom or a wedge top/bottom. This means a trader can look for a stop entry after one of those above patterns and often get a good swing trade.
- Overall, traders should expect bad follow-through today or a deep pullback after yesterday’s big climactic bull breakout bar.
- As mentioned yesterday, today is Friday and the end of the week; often, Fridays can have huge moves up or down in the final few hours of the week as institutions decide on the close of the weekly chart.
- Overall, traders should be patient on the open and expect a lot of limit order trading until proven otherwise.
Yesterday’s Emini setups
Al created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- Yesterday was a big outside up bar; however, outside bars are usually trading range bars, which lead to more sideways movement with trend continuation.
- The bulls want follow-through after yesterday’s outside bar, but the channel before the outdoor bar is tight, which lowers the probability for the bulls.
- The bears will be disappointed with the outside up bar and may look to buy back shorts on any pullback from yesterday. The bulls know this and may look to buy a pullback such as 50%.
- The odds favored a second leg down after the bear breakout that ended on October 10, and they got their second leg down yesterday before the bar reversed up.
- The odds still favor a second leg up and test of the October 4 close. Right now, traders are deciding if the market has enough buying pressure or if the market is going to reverse up after yesterday’s outside up bar.
- The bears want any rally to lead to a lower high from October 5 and continue down with lower prices. While this is possible, the market has been in a bear channel on the daily chart since the middle of 2021. Since channels typically transition into trading ranges, the odds favor a really and formation of a trading range on the daily chart.
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
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.
End of Day video review uploaded.
Today it touched the 50% pullback from the pandemic low.
Brad, next week please stop talking about Bulls, and let’s start talking about what Bears can do.
Leonardo, can we end the rabble-rousing?
What would you like me to say about the bear case exactly?
Right now, the market is down 25% from the high of 4,818.5. If it falls to the 2020 Pre-Pandemic high that would be a 30% correction. The Pre-Pandemic high will likely be major support if we get there.
So, what about a 40% correction? That would take the market to 2,890 area.
The point is that these are all low-probability events and the market is likely in a trading range which mean that traders will likely start buying soon and the market will probably get to 4,000 before the market goes to 3,000.
If I stop talking about the bull case that would mean I am saying the market is only in a very strong bear trend and not in any way a trading range. Also 90% of the time the market is between 40-60% so if I do not mention the bull case, I would be saying that this is one of those 10% of the time where the bears have a much greater probability than 60% which is not true.
If the bears were truly in control they would not have allowed thursday’s big bull trend bar.
One thing I love about Al Brooks, and those who study him, is the consistent analysis of what the score is between the bulls & bears candle by candle. Brad, thanks for all your time/effort
Bulls lost control of market when they failed to hold 14 July.