Emini closed below March 2021 gap on monthly chart

Trading Update: Thursday May 12, 2022

Emini pre-open market analysis

Emini daily chart

• The market closed below the March 2021 high, which was a gap on monthly chart.
• Bears have three consecutive bear bars, which is a sign of strong selling.
• The market has a 6-bar bear micro channel which is another sign of strength.
• The odds are the first reversal up will likely be minor, and the best the bulls can hope for is sideways without getting at least a micro double bottom.
• As of yesterday’s close, the market is down 18%, and it is possible the market will have to fall 20% before buyers come in.
• Bears hope that the breakout below the February – April trading range will lead to a measured move down, projecting to around 3,600. While this is possible, at the moment, it is not likely.
• The odds are the market will have to bounce in the next day or two, and bears will take partial profits. However, there is always the potential in this situation for the bears to sell off quickly here before there is a bounce. Again, a continued selloff is not likely without a bounce first.

Emini 5-minute chart and what to expect today

• Emini is down 35 points in the overnight Globex session.
• The Emini has sold off during the Globex session in a broad bear channel, so the overnight trend is weak.
• The U.S. day session has a reasonable chance of a rally today with the market closing above the open of the day.
• Traders should look for a buy setup on the open of a strong bull breakout with follow-through in case the market is a bull trend day.
• It is still possible the bears get another bear close; traders have to remember to trade the market in front of them and not be in denial.
• As usual, traders should wait for a credible stop entry or strong breakout with follow-through.
• If one has trouble trading the open, they should consider waiting for 6-12 bars before placing a trade.
• If the market looks like a trading range day and the market is close to the open late in the day, it will probably have to test it.

Yesterday’s Emini setups

Al created the SP500 Emini charts.

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

• The EURUSD broke below the 11-bar tight trading range around 12:00 AM PT. The market is forming a possible wedge bottom on the intraday charts and may reverse up today or tomorrow.
• The daily chart 11-bar tight trading range will likely act as a final flag, and the market will reverse back into the March – April range.
• The April 21 selloff was strong enough that there would likely be a small second leg down and it is possible that today is that second leg down.
• Right now, the odds still favor a rally back to the April 21 high.
• The bears want a measuring gap with the April 14 low and the May 5 high.
• It is possible the market had to reach a measuring move based on the March – April trading range, which would project down to 1.0332.
• Overall, traders should look for a possible bull reversal setup today and tomorrow. The bulls will try hard to disappoint the bears on the weekly chart, so the market may reverse up before closing the weekly chart. The first target for the bears would be last week’s low which is 1.0482.

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 bulls gapped down on the open and had a big bear bar on bar 1, a similar setup to the previous day.  It is common for the open to have similar price action as recent days. For example, today and yesterday, both had big bear bars for bar 1 that reversed up quickly, trapping traders into a bad short.
• While bar 1 today could have been the high of the day, the context was bad. The market has had three consecutive bear bars today, so there was a higher risk of an opening reversal up. Also, bar 1 was far away from the moving average.
• The market formed a double bottom at 7:05, and the bears gave up during the next bar, causing the market to break above the neckline of the double bottom and go for a measured move up.
• The bulls rallied and formed a wedge top at 7:25; however, it was followed by a 6-bar bull micro channel which increased the risk of the bulls needing a second leg up and a larger wedge top.
• The bulls got a larger wedge top (6:50, 7:25, 8:15).
• The bears got a strong reversal down back to the open of the day around 9:00 PT, and the market bounced, forming a wedge top that was also a 50% pullback at 9:45 PT. The bears sold off to a new low of the day following the wedge top.
• The bears had a large two-legged selloff following the 8:15 PT wedge top.
• Around 2:00 PT, the bulls formed consecutive wedge bottoms, with the first one ending at 10:30 and the second wedge ending at 11:45. Consecutive bottoms increase the odds of the market reversing, especially when the market has had a lot of trading range price action like today.
• The bulls rallied into the close, forming a bull reversal bar on the daily chart with a tail above.
• While the signal bar is not great, the context is good for bears taking profits and a small bounce on the daily chart.
• The market is getting close to a 20% correction on the higher time frames, so this is a reasonable price level to see a bounce. Note: market reached a 19% correction today.
• Tomorrow is the end of the week, so there is the potential of a big move up or down.

See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.

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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.

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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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