Emini testing 50% pullback of October 18 rally

Trading Update: Friday October 21, 2022

Emini pre-open market analysis

Emini daily chart

• The market is testing a 50% pullback of the rally to the October 18 high. The bulls will try their best to get a reversal up here and the bears want the day to close on its low, below the 50% pullback price level.
• The bears have done an excellent job of disappointing the bulls following the October 13 bull breakout bar.
• The bears are trying hard to get a successful reversal down from the double top on October 5. They want a successful breakout below the October 13 low, a test of the 3,300 area, and the 2020 Pre- Pandemic high.  
• Even if the market gets down to 3,300, investors will see it as a great location to establish long-term positions.
• While the market may fall far below 3,300, the probability is low. It is more likely that there will be buyers not far below, and the market will continue the trading range price action.  
• Right now, the bears have three consecutive bear bars, with two closing below their midpoints. Traders will pay attention to see if the bear can get a 4 consecutive bear close closing near its low, increasing the odds of lower prices.
• The bears have done a good just here, but they need to do more, or buyers will come in soon, betting on a second leg up from the rally to October 18.
• Today is Friday, so weekly support and resistance are important.  The weekly chart currently has a big tail above and below the bar’s midpoint. The bulls want the market to close above the midpoint, and the bears want the market to close below the open of the week.

Emini 5-minute chart and what to expect today

• Emini is down 10 points in the overnight Globex session.
• The Globex market had been in a broad bear channel since the close of yesterday’s U.S. Session until a late 40-point rally and follow-up pullback in progress.
• Traders saw the broad bear channel as a leg in a trading range and expected an upside breakout forming a trading range. This increases the odds of sideways to up on the open.
• As always, traders should be cautious on the open and expect lots of reversals and trading range price action. Most traders should consider waiting for 6-12 bars before placing a trade.
• Traders should be mindful that today is Friday, which means there is an increased risk of a surprise breakout up or down in the session’s final hours. This is due to institutions fighting over the weekly chart.
• Overall, traders should be patient and assume trading range until there is a credible breakout with follow-through.

Yesterday’s Emini setups

Al created the SP500 Emini charts.

Here are several reasonable stop entry setups from yesterday. 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 continuing to form a triangle which is a breakout mode pattern.
• While the odds slightly favor the bulls, the market would not be forming a triangle if one side had a clear advantage.
• The bulls see the past four days as a two-legged pullback test of the October 14 or 13 low. They want a double bottom and breakout above the October 18 neckline and a test of the October 4 close.
• The bears want a successful breakout below the October 13 low and test below the September low.
• Overall, traders should expect more sideways price action until there is a credible breakout up or down.

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

• I will update at the end of the day.

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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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.

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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.

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