Trading Update: Thursday August 25, 2022
Emini pre-open market analysis
Emini daily chart
- The Emini may go sideways as the market will likely bounce and test the midpoint of the year around 4,220. The midpoint of the year is an important magnet, and the market may have difficulty getting far away from it.
- The bears did an excellent job with the selloff from the August 16 high. The odds favor a lower high and second leg down. However, the selloff from the August 16 high is still likely a bear leg in what will be a trading range.
- The most crucial thing to realize on the daily chart is that the market is in a trading range, which means the bulls and bears will both be disappointed, and disappointment usually leads to sideways
- The April 18 low is still a credible target for the bulls. It was a breakout point that will likely get tested at some point over the next couple of months
- The bulls will need a micro double bottom at a minimum before they have a reasonable chance at getting a rally up to the April 18 low.
- It is possible that the market reverses up here, but after a 7-bar bear micro channel, the first reversal up will likely be minor and lead to sideways.
- Even if the bulls return to the August 16 high, the bears will see it as a double top, nested within a larger double top (May 4). Those bears want a strong downside breakout and test of the neckline, which is the June 17 low.
- Overall, traders should expect sideways around the midpoint of the year and 4,200.
Emini 5-minute chart and what to expect today
- Emini is up 10 points in the overnight Globex session.
- Bulls are 40 points away from the 4,200 round number and about 60 points away from the year’s midpoint. Both these are reasonable targets for the bulls.
- While the midpoint of the year might be too far away to get tested today, the market may get there.
- As implied in the above daily write-up, the odds favor a bounce over the next couple of days; however, traders should assume that today’s open will have lots of trading range price action until proven otherwise.
- As I often say, most traders should wait for 6-12 bars before placing a trade. Since most opens are a trading range, most breakouts fail on the open. Getting trapped into buying too high or selling too low is easy.
- If the day is going to be an intense trend day up or down, there will be plenty of time to enter in the direction of the trend.
- Everyone is eager to trade on the open, especially institutions. They are placing large orders on the open, which increases the risk of a surprise move on the open that can trap traders.
- The point is to wait for a credible stop entry such as a double bottom/top, wedge bottom/top, or a strong breakout with follow-through.
- Another thing to mention is that the open can have a big range; typically, the day’s range gets smaller as the day progresses. So, it can be easy to take one or two losses on the open and have no chance of making it back before the end of the day, which is why it is so important to be careful on the open.
- If the day has a lot of sideways price action and the open is in the middle third of the day’s range, traders should assume the day will try and test the open later in the day and that the open will be a magnet going into the close.
- Lastly, as Al often says in the trading room, “price is truth” this means that one must trade the chart in front of them and not what they 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 market is stalling at the 1.000 big round number and will likely bounce to 1.2000 soon.
- The bears want the opposite and for the market to fall to 0.8000, but the reality is that if the market did fall to that price level, there would be bulls happy to buy the EURUSD at a deep discount.
- Since the bulls know there are likely value investors below, it gives them the confidence to buy at 1.000 and buy lower. The bulls buying down here will likely buy down to zero, which means they will trade small enough that the risk will not be too big for them. Al will often call these “Hold on for dear life trades.”
- I bring the above up because it limits the downside for the bears long term, and 1.000 is such a vital round number that the market will likely have a hard time getting far below it.
- While the bears may get a big bear breakout bar closing far below the July 14 low, it is not likely and is a low probability outcome.
- Ultimately, the market will likely get above the August high, which is not the major lower high in the broad bear trend. If the bulls get above it, they can argue that the market is in a bull trend or a trading range but no longer in a bear trend.
- The bulls also want a breakout above the August high which is the neckline for a double bottom (July and August low). Next, the bulls wish for a measured move up to the May high.
- Overall, while the odds favor higher prices, the bulls need to develop more buying pressure, or the market may have to go sideways.
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.
Brad hey, Thanks for the report. Bars 16 – 23 is a tight bear micro channel, could you elaborate how do you recognize it as a wedge?
Thanks Brad, the deep PB at bar 40 was exactly a 50% Pullback from the low of this week (August 24)