Trading Update: Wednesday May 4, 2022
Emini pre-open market analysis
Emini daily chart
- Update: I forgot to mention today is an FOMC day. Traders should exit any intraday trade 1 hour before report is released.
- The bulls want a strong breakout or at least consecutive trend bars to make the market always in long and increase the odds of higher prices.
- The Emini had a bull entry bar yesterday. Although the bull bar was small and closed at the May 2 signal bar high, the entry bar was a bull bar, which is the minimum follow-through the bulls needed. This increases the odds of higher prices.
- Bears hope that this is a breakout pullback short setup; however, with yesterday being a bull bar, it lowers the probability for the bears.
- The daily chart is in a trading range, and so far, it appears that the market has failed to break below the 4,100 bottom of the range.
- The Emini will likely have to test sideways to up for a couple of legs before the bears will be willing to sell again.
- The bull need a strong upside breakout, or else the bears will see bulls as weak and begin to sell, betting on a bear breakout below the May 2 low.
- While the odds favor higher prices for possibly a couple of weeks, the bulls are at the 20-period moving average on the monthly chart and only went 50 points below it. I bring this up because every pullback to the moving average on the monthly chart went at least 100 points below the moving average. This makes me think that May 2 will not be the low, and the market will have to go lower.
- It is possible the market reaches the April 18 bottom of the wedge before the bears try for a breakout below the May 2 low.
- Overall, the Emini will probably trade higher over the next couple of days. The bulls need a strong bull breakout. Otherwise, the market will likely only go sideways to up.
Emini 5-minute chart and what to expect today
- Emini is up 4 points in the overnight Globex session.
- The Globex market has been in a broad bull channel since yesterday’s day session.
- Bulls want a strong bull close today to increase the odds of higher prices on the daily chart.
- The bears want to prevent the bulls from getting a strong bull close.
- Traders should expect a trading range open and trade the market like a trading range until there is a successful breakout above/below the opening range.
- If the market opens with strong consecutive trend bars, traders will consider trading the open as a trend from the open.
- If the first 2-3 bars overlap, that will signify a trading range day, and traders should consider waiting for a credible stop entry setup or a strong breakout with follow-through.
- If a trader has trouble on trading range opens, they should consider waiting for 6-12 bars before placing a trade.
Yesterday’s Emini setups
Al created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The EURUSD has been in a 4-bar tight trading range.
- Bulls have a micro double bottom and want a breakout above the neckline of the April 29 and a measured move up, which would be above the 2020 low.
- At the moment, the odds favor a rally and a close above the 2020 low.
- The sell the close bears who sold the April 28 close are likely disappointed and are likely trying to buy back shorts here. This increases the odds of an upside breakout.
- Ultimately, the April 21 selloff will likely be exhausted, and the market will trade back into the March – April trading range.
- While the odds favor higher prices and a test of the 2020 low, the bulls need 2-3 consecutive bull closes or a strong bull breakout with follow-through to make the market clearly always in long.
- The market is at the open of the week 1.0810, and this will likely continue to be an important price level all week. The weekly chart may close above the open, which would be bad follow-through for the bears after last week’s bear breakout bar.
- Overall, the odds favor higher prices, but the market may only go sideways to up without more signs of bull strength.
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
- Today opened as a trading range for the first half, which led to a reversal up 2 hours before the FOMC meeting was released.
- The initial FOMC release led to a trading range that formed a failed bear breakout down to 11:30 PT.
- Next, the bulls got a strong bull entry bar, and a series of consecutive strong bull closes that led to a buy the close rally.
- The bulls got a strong reversal up following the FOMC meeting today.
- Today was a surprise bar and will likely lead to a couple of legs and a test of the April 18 Low (bottom of the wedge).
- The bulls will want follow-through tomorrow, increasing the odds of higher prices.
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.
Hi Brad, Thanks again!
Is it possible to suggest entries for limit orders on Trading Range days (like on 3rd May, but also today)? It is mentioned a lot in the course, however, in the daily end-of-day charts only stop entry orders are suggested it seems.
2nd part of my question is if the bear trap leg at 20:30 was a good example of what Al mentions in the course (video 18E, around 23:00, a brilliant section!) as the “perverse logic” (I cite): “Bulls want as oversold and climactic as possible, to create as big a bear as possible, and then as big a reversal up as possible”? In other words, a bear leg close to the magnetic bottom of the Trading Range should be considered a strong limit order zone. Correct?
Thanks in advance!
Brad, I like your dot points in the Emini “what to expect today” section” regarding handling the opening bars, very helpful.