Trading Update: Wednesday August 17, 2022
Emini pre-open market analysis
Emini daily chart
- The Emini is testing the 200- day moving average on the daily chart for the first time since April 21 of this year. There will likely be profit taking, however any selloff will likely be minor.
- The market has multiple resistance levels above, increasing the odds of the market going sideways soon.
- The channel up is tight, which increases the probability that the first reversal down will be minor, and the best the bears can expect is sideways trading.
- The bulls are getting close to the April 18 low (4,366.5), the breakout point of the April 22 bear breakout. Bulls will take at least partial profits back at this low, and bears will likely sell for a scalp, making the April 18 low resistance.
- The top of the bear trendline is only 15 points below the April 18 low, increasing the odds that the market will have to reach both magnets.
- Lastly, the bulls have a measured move projecting up to 4,395 from the July 14 low to the measuring gap (July 25th high to the August 2nd low).
- The bulls have three consecutive bull bars, which increases the odds that today or tomorrow will have a bear close.
- The bulls also have a 6-bar bull micro channel. However, the rally up to the current price is getting climactic, which increases the odds of a pullback and sideways.
- There were likely bears who sold the 50% pullback (4,219.5) of the January – June selloff. These bears were likely willing to scale in higher, and the market will probably let those bears back out at their original entry price (the 50% pullback area). This means the market will likely pull back soon.
- The market might pull back just under the April 18 low. Since the April 18 low is an obvious magnet, several sell orders might be just under the April 18 low. This would cause the market to pull back just under the April 18 low, and make traders question if the market will reach it. Even if there is a pullback first, the odds are that the market will go one tick above the April 18 low.
- The bears need the market to go sideways for several bars to convince traders that they are beginning to take control. At the very least, the bears need a micro double top, and even then, any selloff would still likely lead to a minor reversal down.
Emini 5-minute chart and what to expect today
- Emini is down 35 points in the overnight Globex session.
- The Globex market had a measured move down from yesterday’s late selloff.
- The market formed a wedge top on the 60-minute chart just before the selloff happened. The follow-through over the past 6 hours has been good for the bears, which increases the odds that the bears will get the 2nd leg down from the 12:00 AM PT to 5:30 AM PT selloff.
- The 60-minute Globex chart has a 6-bar bear micro channel with six consecutive bear bars. This increase the odds that there will be sellers above any bar, which limits the odds of today being a bull trend.
- The odds are today will close below or very close to the open.
- The market will likely gap down, and the odds favor sideways to the moving average.
- If the bulls or bears start to get strong consecutive trend bar, traders will consider betting on breakouts; until then, the odds favor a limit order market and a trading range open.
- As I always say, most traders are better off waiting for 6-12 bars before placing a trade. Just look at yesterday (8/16) and notice all the reversals that occurred on the open. This happens most days, so there is no rush to enter on the open.
- Lastly, traders can also consider waiting for a stop entry setup such as a wedge bottom/top or double bottom/top.
- The single most important thing to remember is to never be in denial of what the market is doing. As Al always says, it is essential to trade the chart in front of you, not what you hope the market will do.
Yesterday’s Emini setups
Al created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The bears had two consecutive bear bars closing below their midpoints recently. However, the follow-through after Monday’s bear breakout was a bull doji which was disappointing for the bears.
- While the bears will likely get at least a small second leg sideways to down, the odds are the bears will be disappointed soon and reminded that the market is still in a trading range.
- The bulls want the selloff over the past few days to be a test of the July 27th low and form a double bottom higher low major trend reversal.
- Bears want the opposite and for the market to break far below the July 27th neckline, and get a measured move down the month-long trading range that breaks below the July low.
- It is possible that the market needs to reach the 1.0000 big round number one more time before the market will rally.
- The odds are the market will go sideways to up over the next couple of months, so while the bear breakout may be far below the 1.0000 big round number, it is not likely.
- The bulls have a reasonable chance at forming a double bottom and getting some kind of measured move up, testing the middle of the June – July trading range at a minimum.
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
- End of Day Video will be posted later.
See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.
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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.
Now if we can see this rally from the bottom as a parabolic wedge rally on the daily chart, we can expect climactic reversal to form PB and wedge bull flag but before that breakdown, I think there is a strong resistance that is the beginning of the channel, 8/11 (4,200) or Like today parabolic wedge rally from the bottom of broad bear channel, then went sideways and formed bull flag above the last major lower high ,finally bull BO above TR and probably measured move up (wedge top). I think yesterday’s high is an important spot as it is the third leg of wedge top and I am waiting to see if market can test that and either it will be a failed BO (DT) or successful BO above bull channel.