Trading Update: Wednesday October 5, 2022
Emini pre-open market analysis
Emini daily chart
- The bulls have gotten a strong reversal over the past two trading days. The upside Emini surprise breakout is strong enough that the first reversal down will likely fail and lead to a second leg up.
- At the moment, the odds favor a failed breakout of the June low and a test of the 4,000 big round number.
- Traders will pay close attention today to see if the bulls can get a third strong bull close, increasing the odds of testing the 4,000 big round number even more.
- Since the market is in a likely trading range, open gaps are a magnet. One noticeable open gap is the September 6 low. This means that the market will probably have to get back to the September 6 low and let the scale in bulls out.
- The bears will sell the rally over the past two days as a buy vacuum and 50% pullback of the September 21 high. While they know the odds favor a second leg up, those bulls want to make the second leg as small as possible and create a micro double top.
- These bears see the current rally as a pullback from the breakout below the June low.
- Overall, traders should expect a second leg up after the bull breakout from the past two trading days. The market is in a trading range, so traders need to remember that the pullback from the October 4 rally could be deep and disappoint the bulls before the market gets a second leg up.
Emini 5-minute chart and what to expect today
- Emini is down 40 points in the overnight Globex session.
- The Globex market has been selling off in a bear channel for most of the overnight session.
- The market will likely gap down on the open. As always, traders should expect a limit order market and sideways to the moving average.
- Since the daily chart has had a two-bar bull breakout over the past two trading days, traders need to be aware that the market has an increased risk of reversing up today. Bulls will see the gap down as a pullback from the breakout, and they may see today as an excellent opportunity to buy at a lower price.
- As always, traders should consider not trading for the first 6-12 bars since opening reversals are expected.
- Traders should also consider waiting for a credible stop entry such as a double top/bottom or a wedge bottom/top.
- Overall, while there might be an increased risk of the rally today, traders must trade the chart in front of them, not what they hope the market will do. Remember, as Al often says, “Price is truth” one cannot be in denial of what the market is doing.
Yesterday’s Emini setups
Al created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The bulls have gotten a strong reversal back to the 1.000 big round number.
- So far, this is good for the bulls, and the odds favor a second leg up and test of the September high.
- While the market is probably Always in long, it is possible that this is just a buy vacuum test of the most recent trading range, which is the final flag (blue box), and the market will go sideways here.
- At the moment, the odds favor higher prices, meaning the bulls will buy, and buy lower.
- The bears see this as a buy vacuum test of the September 20 high. They want the market to stall here and get a second entry short in the form of a micro double top.
- The bulls were able to close the breakout gap below the September 6 low. The gap closing increases the odds of the selloff to the September low being exhaustion. This means the minimum target for the bulls is the September 20 high.
- Overall, traders should expect the first reversal down to fail and the market to get a second leg up.
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
- Today was a small pullback bull trend day that went outside up.
- The day opened as a triangle that led selloff and test of Yesterday’s low, breaking below it and forming a parabolic wedge.
- The bulls got an endless pullback that led to an upside breakout around 9:15 PT that led to a rally above yesterday’s high before reversing back down.
- The rally formed several gaps, making it a small pullback bull trend. These are dangerous trends to countertrend trade since the gaps often stay open, trapping the countertrend traders. Generally, when you have a clear direction, it is usually better to wait for a clear trendline break, breaking below the moving average, and a retest of the highs before looking to sell. Until that happens, better to assume that the bear reversal attempts will be minor.
- Overall, today was a small pullback bull trend. The open gapped down, and bulls bought it since it was a pullback of the two-bar bull breakout on Monday and Tuesday.
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.