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Emini likely bounce as bears take partial profits

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Trading Update: Tuesday August 30, 2022

Emini pre-open market analysis

Emini daily chart

  • Yesterday was a disappointing bar for both the bulls and bears.
  • The market will likely bounce here as bears take partial profits and may test the 4,100 area. This is because the risk is big for the bears, so they will likely reduce their exposure taking profits and looking to sell higher.
  • There bulls have a bad buy signal bar above yesterday’s high, which increases the odds of sellers above.
  • The problem with the bear case is that yesterday was a pause bar, meaning traders were not eager to sell following Friday’s bear bar. One can argue that the gap down yesterday was good enough follow-through for the bears, and while that is possible, the bears still would have rather seen today close on its low as well.
  • Most bears, since the market is in a trading range, know they have a reasonable chance of being able to sell a pullback if they are patient.
  • Last Friday is a surprise bar, and the odds favor the 2nd leg down. However, one must consider the risk/reward of selling last Friday’s close.
  • While some bears will sell last Friday’s close, they know the reality is that there are probably sellers above last Friday’s high as well. This makes putting a stop above last Friday, not an ideal location, and if anything, bears may be willing to sell more above last Friday’s high. This is partly why traders may wait to sell a pullback here, and the market might bounce.
  • The market is very close to the 4,000 big round number and will likely have to reach it soon. This increases the odds that the upside is limited until the market gets down to the 4,000 area.
  • The bulls will likely need a micro double bottom before they have a reasonable chance at getting a swing up.
  • Overall, yesterday is a reminder that the market is still in a trading range and confusing. The market will likely bounce over the next few days as traders test the 4,100-price level and the August 24 breakout gap.

Emini 5-minute chart and what to expect today

  • Emini is up 14 points in the overnight Globex session.
  • The Globex market has been in a broad channel on the higher time frame since Sunday night.
  • For the reasons stated above (daily chart), the bulls want today to be a bull trend day to disappoint bears on the daily chart further.
  • As always, traders should expect the open to have a lot of trading range price action (limit order market).  
  • Most traders would be better off waiting for 6-12 bars before placing a trade since the odds are the open will have lots of reversal attempts.
  • A trader can also consider waiting for a credible stop entry such as a double top/bottom or wedge top/bottom.
  • Lastly, a trader can wait for a credible breakout with follow-through.
  • The most important thing on the open is to be patient and not be in a rush. The biggest reason trades lose money is that they are often too eager to trade and take too many trades with poor math. This is why Al is constantly saying to focus on getting rid of the “Dumb Trades” (bad math trades).
  • Overall, traders should be open to anything today, and while the odds may slightly favor a bounce and a close above the open of the day, the opposite could also happen.

Yesterday’s Emini setups

Emini 5 Minute Monday, Trading Range Day. Bears take Partial Profits.

Brad created the SP500 Emini chart.

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. Buyers of both the Brooks Trading Course and Encyclopedia of Chart Patterns have access to a much more detailed explanation of the swing trades for each day (see Online Course/BTC Daily Setups).

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

EURUSD Daily: Bulls Need Strong Entry Bar Today
  • The bulls triggered yesterday’s buy signal bar for the second entry and failed breakout below the July 14 low.
  • Yesterday’s buy signal bar has a prominent tail above, which increases the odds of sellers above and sideways. However, it is a reasonable stop entry buy, meaning some bears will exit above yesterday’s bar.
  • The bulls need a strong entry bar today, preferably closing the moving average and on its high. That would increase the odds of follow-through and higher prices.
  • The bears want the market to stall just under the moving average and for the market to set up a second entry short (Low 2), which would trap the bulls into a losing trade above yesterday.
  • Since the EURUSD is in a trading range, the market will probably disappoint both the bulls and bears, and the market will go sideways. One possibility is that today is a disappointment bar for the bulls, and a weak second entry short for the bears, which would confuse both sides.

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

Emini bear trend from the open and parabolic wedge sell climax and vacuum test of 50% pullback and 4000 Big Round Number the lower low major trend reversal and head and shoulders bottom

Al created the SP500 Emini chart.

Summary of Today’s Price Action (Video Below)

  • Today was a trend from the open, leading to a trading range day.
  • The bears got a strong trend from the open, and the market became sell the close on bar 3.
  • It can often be difficult to get short on these opens because the market often tries to form a parabolic wedge bottom. Just look at 7-8 bars and notice the lousy follow-through. While the channel down is tight, when the market forms a big bear trend bard with fad follow-through, it creates climactic, unsustainable behavior.
  • Unsustainable behavior will eventually lead to trading range price action. Since most trend from the open is climactic, this means that the majority of the trend from the open will lead to a trading range.
  • Very few develop as small pullback trends that do not get too climactic for the majority of the day. This is the 20% of the time the market will remain as a trend from the open all day.
  • The bears formed consecutive wedge bottoms around 7:45 PT, and the market was very climactic at this point, so the odds favored sideways. It is important to note that the market was testing the 4,000 big round number, so it was reasonable to expect a test back to 4,000 around 7:45 PT.
  • The bulls had a decent trendline breakout around 9:15 PT, but they needed a retest of the lows to form a higher low major trend reversal or a lower low major trend reversal.
  • Often, the market will try and break to the upside like during 9:15 and make traders question if the 8:15 PT was a higher low significant trend reversal. Most of the time, the market needs 10 bars and a few legs up for the trendline break and ten bears and a few legs down for the retest before there is a credible major trend reversal.
  • The bulls tried to get a higher, lower major trend reversal around 9:45 PT and failed. Next, the market tried to get a lower low major trend reversal around 10:45 and failed.
  • It is worth mentioning that the low close of the day (around 7:45 PT) was a good sell to the close bar even though it was climactic. This means that it should have let traders out back at the low close but never did before the rally up to 9:00. Since the odds favor traders being able to avoid a loss, this means that after the rally to the 9:00 area, the odds favored a test back down to the low close of the day to allow bears out, which is what happened at 10:45.
  • Some bears sold the low close (7:45 area) and higher, like below the 9:20 bear bar. Those bears who scaled in may have been interested in avoiding a loss and exiting breakeven on the entire trade, which would be around 9:45 higher low.
  • The market ended up going sideways for the rest of the day. The critical thing to remember is that most major trend reversals go sideways and lead to a trading range, not a major reversal.

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

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.

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