Trading Update: Wednesday October 18, 2023
S&P Emini pre-open market analysis
Emini daily chart
- The Emini is forming a tight trading range, a breakout mode pattern on the daily chart.
- If the probability were high for the bulls or the bears, the market would not be going sideways.
- The bulls formed a recent upside breakout last week. It is essential to realize that a bull breakout in a trend and a bull breakout in a trading range are different. A bull trend implies higher prices, and the rally will likely last a long time. This means a trader can buy anywhere, use a wide stop, and have a high probability of making money.
- A bull breakout within a trading range has a higher risk of a deep pullback before the second leg up and a possible reversal in the opposite direction.
- Here, the market is forming a bull breakout in a trading range on the daily chart. While the odds favor a second leg up, every bar added to the current tight trading range lowers the probability for the bulls.
- The market is right at the 4,400 big round number, which is a magnet and part of why the market is going sideways.
- The odds favor higher prices, a second leg up, and a test of the 4,450 to the 4,500 big round number. If the bears start to get two or three bear bars closing on their lows, the probability will decrease for the bulls and increase for the bears getting a test of the October low.
Emini 5-minute chart and what to expect today
- Emini is down 20 points in the overnight Globex session.
- The overnight Globex market has gone sideways to down following yesterday’s midday reversal.
- The bears are hopeful that today will start a downside breakout of the tight trading range. More likely, any downside breakout will find buyers below.
- There are probably buyers below yesterday’s low if the market reaches it. Traders should be aware of a possible gap down, followed by an opening reversal to the upside.
- As always, there is an 80% chance of a trading range open and only a 20% chance of a trend from the open up or down.
- Most traders should wait for 6-12 bars before placing a trade unless they are quick to make decisions and trade with limit orders.
- It is common for the opening swing to begin before the end of the second hour after forming a double top/bottom or a wedge top/bottom. This means a trader can wait for one of the abovementioned patterns before looking to place a trade.
Yesterday’s Emini setups
Al created the SP500 Emini chart.
Here are reasonable stop entry setups from yesterday. I show each buy entry with a green arrow and each sell entry with a red arrow. Buyers of both the Brooks Trading Course and Encyclopedia of Chart Patterns have access to a near 4-year library of more detailed explanations of swing trade setups (see Online Course/BTC Daily Setups). Encyclopedia members get current daily charts added to Encyclopedia.
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 forming a triangle, a breakout mode pattern at the moving average.
- The probability is close to 50% for both the bulls and the bears.
- Because the market is holding under the moving average, the bears have a slight probability advantage over the bulls. The advantage the bears have is not much. Perhaps 3% -4% better odds than the bulls getting an upside breakout.
- Tight trading ranges are bad entry locations, with stops betting on a successful breakout. This means that most traders should consider waiting to see what the breakout of the tight trading range looks like before placing a trade.
Summary of today’s S&P Emini price action
Richard created the SP500 Emini chart (Al on leave).
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
Al Brooks and other presenters talk about the detailed Emini price action real-time each day in the BrooksPriceAction.com 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.
