Trading Update: Monday August 22, 2022
Emini pre-open market analysis
Emini daily chart
- Emini strong enough selloff on daily chart, likely forming a pullback down to the 4,000 big round number.
- The overnight selloff on the daily chart increases the odds that the first reversal up will fail and lead to a 2nd leg down.
- While the rally up to August 16 is good for the bulls, it was exhausting and more likely to pull back 300 points down to 4,000 big round number before it would rally 300 points up to 4,600.
- The Globex market reached the June 2 high during the overnight session, which is the first target for the bears. Some bears sold the June 2 high and scaled in higher. They will likely be disappointed and buy back shorts at the June 2 high. This means the market could have a slight bounce here.
- At the moment, the market is below 4,200 and the past 7 trading day lows. This is good selling pressure by the bears and increases the odds of sellers above, and the market may form a lower high with the August 16 high, and get a second leg down before the bulls can get resumption and a test of the April 18 low.
- The April 18 low is still a credible resistance level for the market to test, which means if the market tests the August 16 high, bears may wait to sell closer to the April 18 low.
- At the moment, the current selling pressure is good for the bears and increases the odds that the market will go lower.
- Traders will pay attention today to see what the bears can do with the large gap down on the open. The bears need to prevent today from becoming a bull reversal bar, and preferably get a close below the midpoint, or a close on the day’s low.
- Even if the market tests the 4,000 big round number, traders will see it as a pullback from the August rally and expect a higher low.
- Overall, as strong as the August rally looks, it is within an overall trading range, which increases the odds of sideways price action.
Emini 5-minute chart and what to expect today
- Emini is down 50 points in the overnight Globex session.
- The market will gap down on the open.
- The bears want today to close on or near its low, increasing the odds of a lower high (below August 16) and a 2nd leg down.
- The odds favor a trading range open which means most traders should expect sideways trading on the open until there is a clear breakout with follow-through.
- Most traders should wait for 6-12 bars before trading since the odds favor sideways and multiple reversals.
- Traders can also consider waiting for a credible stop entry such as a double bottom/top or a wedge bottom/top.
- Lastly, traders can wait for a clear breakout with follow-through before placing a trade if they want a higher probability.
- Overall, if today is going to be a strong trend day, there will be plenty of time to enter the trend.
- The single most important thing is to trade the market in front of you, and not what you hope the market will do. If the market is in a trading range, do not be hopeful of a breakout. Until there is a clear breakout, there is no breakout.
Friday’s Emini setups
Al created the SP500 Emini charts.
Here are several reasonable stop entry setups from Friday. I show each buy entry with a green rectangle and each sell entry with a red rectangle. Buyers of both the Brooks Trading Course and Encyclopedia of Chart Patterns have access to a much more detailed explanation of the swing trades for each day (see Online Course/BTC Daily Setups).
My goal with these charts is to present an Always In perspective. If a trader was trying to be Always In or nearly Always In a position all day, and he was not currently in the market, these entries would be logical times for him to enter. These therefore are swing entries.
It is important to understand that most swing setups do not lead to swing trades. As soon as traders are disappointed, many exit. Those who exit prefer to get out with a small profit (scalp), but often have to exit with a small loss.
If the risk is too big for your account, you should wait for trades with less risk or trade an alternative market like the Micro Emini.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The EURUSD is testing the 1.0000 big round number and the July 14 low.
- The market will likely bounce soon since the 1.000 big round number is obvious support.
- The bulls are hopeful that the market will form a double bottom major trend reversal, rally back to the 2017 low, and reach the apex of the June – July trading range, which it probably will.
- Bears hope that the selloff over the past week is strong enough to successfully break below the 1.0000 big round number and the July 14 low; however, any bear breakout below will likely be brief and fail.
- Traders will pay close attention to today to see if the bulls can stop the selling pressure. The selloff down from August 10 is strong enough that the bulls will likely need a micro double bottom before the bulls can take control.
- Overall, the market is at support, but bulls need to start showing signs of strength here.
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.
Trading Room
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.
