Trading Update: Thursday November 3, 2022
Emini pre-open market analysis
Emini daily chart
- The Emini had a strong reversal following the FOMC report yesterday and the Emini may test down and reach the October 21 low before the market can bottom. The buy-the-close bulls who bought the October 28 bull breakout were disappointed with the past two trading days and tried to get out at their original entry price but failed, and the market sold off quickly as more and more bulls began to give up.
- Yesterday is a strong enough bear breakout bar to increase the odds of at least a second leg down. Even if today is a bull bar which would be lousy follow-through for the bears following yesterday’s breakout bar, it is still likely to lead to a small second leg down.
- Today would have to be a very strong bull bar closing on its high to undo a lot of the damage the bears caused yesterday, and even then, the odds will still favor a second leg down. The rally up to October 28th has a wedge shape, increasing the odds that the market needed two legs down to correct the wedge top. Yesterday was the first push down, and the market will likely need a second after and rally attempt.
- While yesterday was good for the bears, the odds still favor the market testing the 4,000 big round number over the next couple of months. The market may have to get down to the October 21 low before it begins a test up to the 4,000 big-round number.
- The double top with September 21 and November 1 may be successful, and the market will break out below the October low. The monthly chart has a major trendline below (2009 low and 2020 low).
- If the market gets a measured move down from the September 21 high to the October low, that would project to 3,100, and if the market went sideways there for several months, that would be enough for the market to reach the significant trendline mentioned above on the monthly chart.
- Overall, yesterday was a strong enough breakout that the odds favor lower prices, even if the market has to go sideways first.
Emini 5-minute chart and what to expect today
- Emini is down 38 points in the overnight Globex session.
- The Globex market has been selling off for the overnight session and has broken below yesterday’s low.
- The bears want today to gap down and create follow-through selling after yesterday’s bear breakout.
- Yesterday was climactic, so there is a 75% chance of two hours of sideways trading beginning before the end of the second hour. This means traders should expect trading range trading for a large portion of the day. Less likely that the market will form another intense bear trend day.
- As always, traders should assume the trading range open and wait for 6-12 bars before placing a trade.
- Traders can also wait for a credible swing trade from a double top/bottom or a wedge top/bottom.
- There is a 50% chance the market will get follow-through selling on the open but still a 75% chance of trading range trading as mentioned above.
- Overall, traders should expect a lot of trading range trading today and for both the bulls and bears to be disappointed today.
Yesterday’s Emini setups
Al created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The bulls gave up after the FOMC report was released yesterday.
- The bulls tried to keep the October 18 breakout gap open, with the four-bar bear micro channel ending on November 1. The market attempted to break out above the November 1 high but failed and went outside, closing below the October 18 breakout point.
- At the moment, the market is getting close to the October 21 low. The bulls will try and form a double bottom higher low major trend reversal at the October 21 or October 13 low.
- It is common to have a higher low major trend reversal, such as October 13, that forms after too many bear bars in a tight channel. This increases the odds of sellers above and the reverse from the higher low being minor. This causes the market often to need a retest of the October 13 higher low and form a double bottom higher low major trend reversal.
- Traders do not know if the test will be the October 21 low or the October 13 low, but they will see either as another attempt at a double bottom higher low major trend reversal.
- The bears see the selloff that began on October 27 as a double top. They want a breakout below the October 13 neckline and a measured move down below the September low.
- More likely, the downside will be limited, and even if the EURUSD falls below the September low, the market will find buyers soon. This is due to the daily chart being in a bear channel since mid-2021, and the odds favor the bear channel converting into a trading range. This means that the odds favor sideways to up-trading for some time.
- Another thing to point out is that the monthly chart has a 10-bar micro channel and a parabolic wedge shape. This is climacteric behavior which is not sustainable. Also, the market is far away from the 20-period exponential moving average, which will also limit the downside until the market can get closer to the moving average.
- Ultimately, the market will likely rally back to the 2017 lows and allow the scale-in bulls out with a profit, but that could take several months to happen.
- Overall, traders will pay close attention to today’s close. The bears have a great-looking bear trend bar, but they will have to keep this bar near its low and prevent a reversal up for the entire U.S. Session, which will be a challenge for the bears. The bulls will try their best to reverse today’s bear breakout and disappoint the bears before the close. The selling since the October 27 high is strong enough that the upside is likely limited until the bulls can develop more buying pressure.
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
- End of Day video will be released this week.
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.