Trading Update: Thursday April 27, 2023
S&P Emini pre-open market analysis
Emini daily chart
- The bears got follow-through on the daily chart after Tuesday’s bear breakout, but likely to be disappointed today. This is a strong enough breakout with follow-through to have at least a small 2nd leg down, which means the first reversal up will probably fail.
- The bulls want the past two days to be a failed breakout of the April 6th low and test of the March 22nd high. Next, the bulls want a strong reversal bar today.
- Even if today is a strong reversal up, the odds are there will be more sellers above, and the bears will get at least a small 2nd leg down.
- It is possible that yesterday’s selloff is a second leg trap, with leg 1 ending on April 20th. However, the channel down from April 18th is very tight. This increases the risk of any rally leading to a lower high and a second leg down.
- Also, it is important to remember that most 2nd leg bear traps do not reverse the market into bull trends. This means that if the bulls get a reversal up, it will probably lead to sideways trading, even if it goes above the top of the bear breakout (April 25th).
- The bulls need to undo the damage caused by the bears over the past two days. At a minimum, the bulls need to get some micro double bottom. However, as I said above, the bears will probably get at least a small 2nd leg down.
- The 4,000 big round number is an obvious target for the bears. The Emini has spent well over a year oscillating around 4,000, and it will probably continue to be an important magnet for some time.
- Overall, the Emini will probably go a little bit lower; however, the market is in a trading range, which means that traders should expect the bears to be disappointed by whatever selloff they get.
Emini 5-minute chart and what to expect today
- Emini is up 18 points in the overnight Globex session.
- The overnight Globex market rallied since late yesterday afternoon.
- The bulls want to undo as much damage as possible caused by the bears of the past two days.
- While the bulls may get a reversal up and strong trend day, more likely, the bulls are so disappointed they will scalp out. This means that traders should be prepared for a possible opening reversal following the gap up.
- As I often say, traders should be prepared for 6-12 bars sideways trading. This means that most traders should be cautious trading the first 6 bars at a minimum. By waiting for the bars to develop, a trader will gain more information on the formation of the day.
- Most traders should try and catch the opening swing trade that typically begins before the end of the second hour. It is common for the opening swing to develop after forming a double top/bottom or a wedge top/bottom.
- Lastly, traders must be open to the possibility of anything and not be in denial if today is a strong bull trend or another strong bear trend day.
Emini intraday market update
- The Emini gapped up and formed a trend from the open.
- The gap up was large enough to expect a second leg up after any brief selloff. Whenever you get a gap up, it is important to remember that it is a breakout. A gap should always be considered a breakout, and breakouts typically have a second leg in the direction of the breakout.
- There is a 60% chance that the trend from the open will not last all day, and it will likely convert into a trading range. This means a 60% chance that the market will go sideways for several bars. This does not mean a 60% chance of a test of bar 1.
- So far, the bulls have done an excellent job of damaging what the bears have accomplished over the past two days.
- While the bears will probably get at least a small 2nd leg down, the rally today is certainly not what the bears want to see.
- As of bar 33 (9:15 PM PT), the market is Always In Long, and the first reversal down will probably fail. The bears have yet to get a close below the moving average, which means the bulls are strong.
- It is reasonable to look to take profits on longs and wait to buy a pullback. However, bulls will be buying, confident they can scale in lower.
- Most bears will probably wait for more selling pressure to develop.
- While today is climactic, it is a strong bull trend. Trends can last a long time, so it is better to wait for bear breakouts to fail and look to buy pullbacks (failed bear breakouts.
- Since bar 33 is so far away from the moving average, the market will probably begin to go sideways and get close to the moving average.
Yesterday’s Emini setups
Al created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The EURUSD is forming a tight trading range after exceeding the April 14th high.
- The bulls want an upside breakout and higher prices. The bears want a downside breakout. However, they need to get a strong breakout below the moving average.
- With the channel up from the March low being as tight as it is and the majority of the bars above the moving average, most traders should wait for the bears to begin to get consecutive closes completely below the moving average before looking to sell.
- The odds are the market will pull back soon, and the channel that began on March 24th will transition into a trading range. This means that the odds favor prior higher lows getting tested.
- Overall, the odds favor a pullback and test of the bottom of the channel. Low probability that the bulls get a strong upside breakout that starts the market cycle over, leading to a measured move up.
Summary of today’s S&P Emini futures price action
Al created the SP500 Emini charts.
End of day video review
YouTube End of Day Emini Review and Q&A with Brad Wolff: https://www.youtube.com/live/ir4F-YrtLco?feature=share
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.