Emini bears hopeful for 2nd leg trap

Trading Update: Wednesday June 1, 2022

Emini pre-open market analysis

Emini daily chart

• Emini bears hopeful for 2nd leg trap, wanting a three-bar bull bar rally up to May 27 and a test of the May 25 low.
• Bulls see the three consecutive bull bars up to May 27 as a strong enough bull breakout that will lead to a measured move projection up to the April 18 low. This is because trading ranges close open gaps.
• The bulls will soon reach last month’s high (4,303). However, the market could pullback to the May 25 low first below testing up to the May 4 high.
• The daily chart is in a trading range which makes me think the market will reach the April 18 low.
• The May 27 buy the close bulls were disappointed by the May 31 bear doji bar and got out breakeven (May 27 close 4,155.75).
• The Market tested the May 17 breakout point high yesterday and could not close it, which is good for the bulls. The bulls will try hard to keep this gap open and get a measuring gap based on the May 20 low to the May 17 high projecting up to around the April 18 low.
• When you have multiple measured move projections that project to around the same price level (April 18 low), it increases the odds that the market will get there.
• Overall, the market is deciding if the bulls will get a strong second leg up from the May 27 three bull bar breakout or if the bears will get their successful 2nd leg trap and test of the May 25 high.  

Emini 5-minute chart and what to expect today

• Emini is down 5 points in the overnight Globex session.
• The market will likely have a small gap on the open, and the odds are the gap will get closed.
• The bulls will want a second leg up from yesterday’s late reversal up during the day session.
• The bears will want a double top with the lower high from yesterday’s 12:00 PT area and a test down to yesterday’s low.
• Today will likely be a trading range day, so traders should expect limit order trading.
• Most traders should wait for a credible stop entry, such as a double bottom/top, a wedge bottom/top, or a strong breakout with follow-through breaking above/below several bars.
• If a trader has trouble on the open, they should consider waiting for 6-12 bars for more clarity. The open often has lots of reversals, so it is important not to be too eager to bet on breakouts. It is easy to take a big loss on the open, betting on a breakout that fails.

Yesterday’s Emini setups

Brad 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.

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 tested the May 5 breakout point yesterday, and so far, the gap (May 5 high) is still open (negative gap). The bulls hope they will be able to get a measure more up from the May 13 Low to the May 5 high, projecting up to April 21 high.
• The bears are still hoping that May 23 and 24 are part of a 2^nd leg trap. However, the bears have had two chances to reverse the market down (May 25 and June 1). At the moment, if today closes near its high, the bears may give up, and the market could break above the May 31 high, triggering last month’s buy signal bar.
• The issue is deciding if today will be a higher low major trend reversal.
• So far, the market has had around a 33% pullback from the May 31 high.
• The problem the bulls have is that higher low major trend reversals have deeper pullbacks than 33%, so this may make traders question if this is a valid higher low major trend reversal.
• It is possible the market goes straight up here. However, the bulls will likely need a more credible double bottom (this would form a significant trend reversal to get a sustainable bull trend.
• It is possible that the bulls rally up to the April 21 high and have a deep pullback forming a higher low major trend reversal. That would create a larger two-legged minor reversal that could form a deep pullback and form a higher low major trend reversal. This is similar to the 5-minute Emini session yesterday (see yesterday’s 5-minute Emini chart above for June 1).
  • The bulls had a strong minor reversal up from the 9:55 high (Emini 5-minute June 1). However, the rally just continued up in a small pullback bull trend. When you get a strong minor reversal up like what happened at 9:55 PT, the market will often have a deep pullback to form a credible higher low major trend reversal, which occurred during yesterday’s Globex session.
• The bears are still hoping that any rally will stay below the April 21 high or the March 31 high, and the market will continue in a bear channel. However, I think that is unlikely.

Summary of today’s S&P Emini futures price action and what to expect tomorrow

Brad created the SP500 Emini charts.

End of day summary

• Today formed an early wedge bottom that led to a strong bull trend day.
• The rally up to 8:15 was strong enough to expect at least a couple of legs up at a minimum and a possible measured move up based on the open of 7:30 PT to the close of 8:15 PT, projecting up to 4,164.
• When a trend is this strong, it is terrible to look for stop-entry shorts. Instead, traders should wait for the reversal attempt to fail and look to buy the failed reversal (notice how every red except for the first and last had a reasonable stop entry buy following it).
• Overall, the market had a strong bull breakout at 8:30, leading to several legs up and a strong trend for the rest of the day.

A more detailed discussion is below:

• ***Note: I will post a more detailed discussion soon. ***

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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