Trading Update: Tuesday December 28, 2022
Emini pre-open market analysis
Emini daily chart
- The bulls had a valid second entry buy last Friday (December 23rd). However, it failed to trigger yesterday. This increases the probability of market likely to continue sideways going into the end of the year.
- The market continues to stall around the 50% pullback of the 2-month rally that ended on December 13th.
- With only three trading days left in the year, traders should assume the market will go sideways in a tight trading range and disappoint traders.
- The market may create an inside bar on the weekly chart. This is another reason for the range to be tight for the last three days of the year.
- While there may be a surprise breakout in the final three trading days of the year, more likely that the range will be limited.
- The odds still favor a test of the December 6th low at some point over the next couple of weeks.
- The market is in a trading range, and it was reasonable to buy the December 6th low and scale in lower. Whenever you do something reasonable, it is generally a high probability trade that the market will let you out at your original entry.
- It is also a high probability that the market will allow you to exit breakeven on your entire trade (midpoint of two entries), which is likely what happened on December 21st. Bulls who bought the trading range low around December 6th scaled in lower and used the bounce on December 21st to exit breakeven on the entire trade.
- The bull’s inability to trigger Friday’s buy signal is a reminder of something wrong with the bull case. If the bulls were truly in control, yesterday would have been a strong entry bar. This is another warning that the market is in a trading range and that traders should expect further disappointment for both the bulls and the bears.
- Remember, trading ranges constantly form bad-looking signal bars. Also, when you get an excellent-looking signal bar like December 23rd, they often fail to trigger (or have a bad-looking entry bar), and the next bar is an inside bar like (December 27th).
- Overall, traders should expect the market to continue to go sideways for the rest of the week.
Emini 5-minute chart and what to expect today
- Emini is up 3 points in the overnight Globex session.
- The overnight Globex session has been in a trading range for most of the session.
- Bears are attempting to get a downside breakout below the 1:15 AM PT low, which is the neckline of the double top (12:30 AM high and the 5:15 AM high). The bears hope the market will get a measured move down based on the double top.
- Most important thing to realize is that the market is in a tight trading range and in breakout mode. Eventually, there will be a successful breakout and measured move; however, until then, traders should assume the market will continue sideways.
- The U.S. day session is likely to have a trading range open. This means traders should consider not trading for the first 6-12 bars unless they are comfortable with limit orders and wide stops.
- Traders can also look for a swing trade on the open, often with double top/bottom or a wedge top/bottom. Typically, a swing trade will come from one of the four abovementioned patterns.
- Lastly, until there is a breakout, there is no breakout. This means that traders should assume the market will have a lot of trading range price action until there is an apparent reason to believe otherwise.
Emini intraday market update
- Bar 1 was a big outside-up bar. This increases the odds of the day being a bull trend or a trading range day.
- Bar 2 tried to break above the high of yesterday but failed, and the follow-through on bar 2 was disappointing.
- The market sold back off to the open of the day at 7:30 AM PT.
- So far, the day has had a lot of trading range price action.
- 7:30 AM is a big bar and a possible 2nd leg trap. This increases the risk that the market will have to test the 7:30 AM PT bar high at some point today.
- AT the time of writing this (7:45 AM), the market is attempting to form a failed breakout below the bar 1 low.
- The market will likely test the open of the day soon.
- Traders should assume the day will remain a trading range day.
Yesterday’s Emini setups
Al created the SP500 Emini chart.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The EURUSD continues to go sideways in a tight trading range, above the moving average.
- The market has been above the moving average for 33 bars, which is extreme. This increases the odds that the market will have to reach the moving average.
- The moving average reflects the fair (average) price. If traders are willing to buy above the moving average, this means that traders are willing to pay more than what is considered the average price.
- In general, traders are happy to pay above average for something if the momentum is strong. However, the EURUSD has been going sideways in a tight trading range for 10 bars.
- A tight trading range is value, not momentum; nobody will be left to buy above the moving average at some point. The market will have to fall below the moving average to find buyers, which could happen quickly.
- The bulls want the small pullback bull trend to continue; however, 33 bars without touching the moving average is extreme and unsustainable. This means that the market will likely have to pull back soon.
- Overall, traders, should, at a minimum, expect a couple of legs sideways to down and for the market to get a couple of closes below the moving average.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Brad created the SP500 Emini chart.
End of day review
- End of Day chart delayed. I will post it on December 30th.
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.