Trading Update: Tuesday May 3, 2022
Emini pre-open market analysis
Emini daily chart
- The Emini broke below the February low yesterday and reversed up as a bull bar closing near its high.
- The bulls want a strong entry bar today, increasing the odds that the market reaches the April 18 low (4,364.5) and possibly higher.
- The bears see yesterday as a breakout pullback short and will try hard to get a successful bear breakout of the February lows. They want the market to get down to the 4,000 big round number and 3,600, which is a measured move down of the February – March trading range.
- Another magnet is 3,840, which would be a 20% correction in the Emini.
- The bulls see yesterday as a possible nested wedge bottom with (1/24, 2/24, 5/2) and a smaller wedge for the third push down (4/25, 4/27, 5/2). The smaller wedge can be viewed as a micro double bottom that had a failed breakout on 5/2 (this creates a wedge pattern).
- The bulls have had decent buying pressure with the two bars on 4/25 and 4/28, which increases the probability for the bulls. However, the probability is not yet high for the bulls.
- It is reasonable for most swing bears to exit above yesterday due to the risk of two legs up. Also, the risk of testing the April 18 low is real, and the market will probably have to get back to it.
- One crucial thing to keep in mind is the market got down to the 20 period moving average yesterday on the monthly chart for the first time since 5/29/20.
- While the odds favor buyers at the moving average, the market usually falls at least 100 points below the moving average before reversing back up, which makes me think the market will have to get down to 4,000 before it can go much higher. If this month is a big bull bar that closes around 4,500, it could drag the moving average up higher, giving the impression that the market went 100 points below the moving average.
- More likely, that will not happen, and the market will have to go lower to satisfy a test of the moving average. Look at a monthly chart since 2009 and try to find when the market went less than 100 points below the moving average when it was away from the moving average for more than 20 bars.
Emini 5-minute chart and what to expect today
- Emini is up 8 points in the overnight Globex session.
- The bulls want today to be bull trend day which would be an entry bar on the daily chart for the 5/2 signal bar.
- The bulls will look for a trend from the open and look to buy a bull breakout or a credible bottom such as a double bottom or wedge bottom.
- The bears want to prevent a strong trend day today, and at a minimum, the bears want today to be a trading range day which would disappoint the bulls.
- The bulls have a reasonable chance at a bull trend day today, more likely, they will be disappointed, and today will close as a trading range day, disappointing both the bulls and the bears.
- Overall, while today has the potential to lead to a bull trend day, as Al always says, “price is truth,” so one has to trade the market that is in front of them and not what they hope will happen.
- If the market opens sideways, traders will trade it like a trading range until a credible breakout occurs.
Yesterday’s Emini setups
Al created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The EURUSD is forming a micro double bottom that will likely reach the 2020 low today or tomorrow due to the scale in bulls who bought the 2020 low and lower. The bears know this, so they most likely scalped out below the 2020 low.
- Ultimately, the market will likely have to return to the March – April trading range low (1.0757), making it a final flag reversal.
- The market will also likely reach the April 21 high (1.0936) since the April 21 selloff has been the most substantial selloff since the bear trend began in 2021. This means that the April 21 selloff is likely exhaustion.
- The bulls will likely need to make the market go sideways for several bars before they can form a credible bottom. This means that the best the bulls can expect here is sideways around the 2021 low until the bulls develop more buying pressure or get a strong bull breakout with follow-through.
- The bears hope that any reversal up here will be minor and lead to a minor reversal and more down, possibly to the 2017 low.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Al created the SP500 Emini charts.
End of day summary
- The Emini formed a trading range on the open and remained a trading range into the close.
- The bears tried to form a wedge top around 7:45 PT. However, the bulls got an upside breakout that led to another wedge top around 8:45 PT. This was a type of consecutive wedge top pattern.
- While the 8:15 PT breakout was strong, the next 6 bars were weak and had lots of overlap, which increased the odds of the bulls giving up and more trading range price action continuing. The rally up to 8:30 PT ended up being a large second-leg trap. Second leg traps are common on trading range days.
- Overall, the market was a trading range day, which means traders will bet that breakouts above swing highs/lows will fail.
- Today closed above the open, which is follow-through for the bulls. While the follow-through is disappointing for the bulls, it is at least a bull bar and increases the odds of higher prices over the next couple of days.
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.