Trading Update: Tuesday May 24, 2022
Emini pre-open market analysis
Emini daily chart
- Emini bulls wanting rally after getting a strong reversal up after last Friday reached the 20% correction (3,839.8) level. The bulls hope that the next couple of trading days will lead to a test of the February 24 low.
- The selloff down from May 4 looks like a leg in a trading range, which increases the odds that the market will soon have a bull leg in a trading range that may test the February 24 low.
- The market is in the middle of an 11-bar tight trading range. This increases the odds that the market will have to go sideways here.
- The bulls hope that today will be another bull bar closing on or near its high. The market is in a trading range, which means traders should expect disappointment.
- Today will likely close as a doji or possibly a bear bar. This would disappoint the bulls and remind traders that the market is still in a trading range.
- If the bulls can get 2-3 strong bull bars like March 17, that would change the market’s character and increase the odds of a strong rally.
- Without that, the odds favor more sideways to up trading.
- The weekly chart will be important this week. As Andrew and Al stated, the weekly chart has seven consecutive bear bars, which is rare. This means that eight consecutive bear bar bars are unlikely and that this will close above the open. I bring this up because the market should have buyers at the open of the week (3,931) and bounce if it reaches that level.
Emini 5-minute chart and what to expect today
- Emini is down 43 points in the overnight Globex session.
- The market will gap down today.
- Traders should expect the market to go sideways to up and test the 20-bar moving average. Once the market reaches the moving average, the market will decide on trend resumption down, or trend reversal up.
- The market will likely have to form a double bottom/top or a wedge bottom/top, so traders can look for either of those to present a credible swing trade. What I mean is if the market is going to resume down, it will likely have to form a double top or a wedge top, and if the market is going to bottom, it will likely have to create a double bottom or a wedge bottom.
- If one has trouble trading the open, they can consider being patient and waiting for 6-12 bars before placing a trade. The open has the potential for many reversals (trading range price action) so trades need to be cautious.
- Lastly, one can wait for a strong breakout with follow-through closing above/below the initial range if they want a higher probability.
Yesterday’s Emini setups
Al created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- Yesterday, the bulls got a strong breakout bar closing on its high and far above May 5th high. This is probably a strong enough surprise to make the market always in long.
- The bulls need follow through today. They hope they can get a strong follow-through bar similar to yesterday’s bull breakout bar.
- The bulls got to within 20 pips of the March – April trading range low and will likely get there today or within the next couple of days.
- The bull breakout of the May 5th high may lead to a measured move projection from the May 16 low to the May 5 high, which would project to the April 21 high. April 21 high is a major lower high and a likely target for the bulls.
- Bears want to prevent the bulls from getting follow through today. They hope today will be like the May 17 and May 19 breakouts that both had bad follow through on the next bar. The problem the bears have here is that yesterday’s bull breakout bar is a surprise which will cause traders to expect a second leg up.
- Also, it is worth mentioning that the bulls have a 7-bar bull micro channel, increasing the odds of the first reversal being minor.
- Overall, traders will pay close attention to see what follow through the bulls get after yesterday’s bull breakout. If today is a big bull follow-through bar closing on its high, the market may race up to the April 21 high. If today is disappointing for the bulls, it may lead to confusion and cause a pullback.
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 market had a sell climax on the open that had a trend reversal up.
- Today was a gapped-down and bear trend from the open.
- When the market has a trend from the open, there is a 60% chance that the day will evolve into a trading range day, which happened today and the previous day. There is only a 20% chance the entire day will remain a trend from the open.
- Today sold off aggressively on the open down to 7:20 PT, which is climactic and unsustainable behavior. This increased the odds of the market having to form a trading range soon.
- The market sold off down to a 50% pullback (3,895) from May 20 – to May 23 and found buyers below the 50% level, and the market reversed up for the rest of the day.
- Overall, the open of the week will likely remain an important magnet all week due to the seven consecutive bear bars on the weekly chart. It is unlikely that the bears will get eight.
- Tomorrow, there is an FOMC report at 11:00 PT, so traders should be cautious going into the report.
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.