Trading Update: Tuesday October 10, 2023
S&P Emini pre-open market analysis
Emini daily chart
- The Emini is forming a bottom and is testing the August 18th low.
- I have been saying for the past few weeks that the Emini will probably test the August 18th breakout point low due to trapped bulls.
- It was reasonable for the bulls to buy the breakout below the August 18th low and scale in lower, betting on a trading range.
- Traders will pay close attention to see how the market reacts to the August 18th low. The Bulls hope they can break far above the low, and the Bears want to keep the August 18th breakout point gap open. However, more likely, the gap is going to close.
- As strong as the selloff down to the October low appears, it is likely a complex two-legged pullback on a higher time frame. This means the odds favored a trading range forming, not a bear trend.
- It is possible that the selloff to the October low is a 2nd leg trap. The rally could be deep and go far above the August 18th low.
- The market might be Always In Long. However, the bulls have not done enough to make it Always In Long. Ideally, the bulls need to get 1-2 closes above the moving average before traders will be convinced they have taken control.
- However, the rally over the past two trading days is strong enough for the market to be Always In Long and likely to lead to higher prices.
- The bears want to trap the bulls by forming a strong bear trend bar. However, that would create a Low 1 short, and buyers would likely be below it.
Emini 5-minute chart and what to expect today
- I am traveling in Europe and due to the time zone difference, I am writing this blog several hours before the open, and the market is only 10 points away from yesterday’s close.
- Traders should pay attention to the August 18th low as the market may try and reach it today or tomorrow.
- There is an 80% chance of a trading range open and only a 20% chance of a trend from the open.
- Most traders should consider waiting 6-12 bars before placing a trade. As mentioned above, there is an 80% chance of a trading range forming on the open.
- Traders should try and catch the opening swing that often begins before the end of the second hour after forming a double top/bottom or a wedge top/bottom.
- By waiting for one of the patterns mentioned above to form, a trader can enter on a stop entry, allowing them to have a great risk/reward setup.
- Because of the past two days forming strong bull trend bars on the daily chart, the downside is likely limited. It is possible today to create a pullback on the daily chart before the market reaches the August 18th low.
- Lastly, the most important thing in the open is being patient and ready for anything. A trader must be calm and never in denial of the price action in front of them. As Al Brooks says, “Trade the chart in front of you, not what you hope will happen.”
Yesterday’s Emini setups
Al created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The EURUSD tested the moving average (blue line) last Friday. However, it failed to reach it and pulled back yesterday.
- This will increase the probability that the market will have to reach the moving average over the next day or two.
- Yesterday, I formed an inside bar, a High 1 buy signal bar. There will probably be sellers above yesterday’s high, at least briefly. High 1 buy signal bars typically lead to deeper pullback followed by resumption of the move.
- The bears are hopeful that today will form a bear bar closing on its low. However, if it does, bears may hesitate to sell below it. This is because traders will question if the moving average has been adequately tested. The market closed above the moving average on August 30th, and traders expect the same to happen here.
- Overall, the market will probably close above the moving average in the next day or two. However, because the channel down is tight, the upside will likely be limited over the next several weeks.
Summary of today’s S&P Emini price action
Al created the SP500 Emini charts.
End of day video review
Live stream videos to follow later (Brad travelling).
See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.
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.