Emini possible bear breakout below 6-day tight trading range

Trading Update: Tuesday June 7, 2022

Emini pre-open market analysis

Emini daily chart

• The market is in a 6-bar tight trading range following the three-bar bull breakout on May 27, and possible bear breakout. This has lowered the probability of bulls getting a measured move up of the 3-bar breakout before getting a deep pullback.
• The bears want a strong bear trend day which would increase the odds of a test down to the May 25 low. Even if the bears get a strong trend bar, they will need follow-through.
• The 6-bar tight trading range after the 3-bar bull breakout is a reminder that the overall daily chart is in a large trading range.
• The bulls want a measured move up of the 3-bar bull breakout ending on May 27 that projects up to the April 18 low.
• The bears hope that the rally up to May 27 is a 2^nd leg trap, and the market will test the bottom of the 3-bar breakout (May 25).
• The odds still favor the bulls reaching the April 18 low regardless of if the bears cause a deep pullback and test the May 25 low. However, every bar that gets added following the May 27 rally makes the probably more neutral for both the bulls and the bears. 
• Bulls that are long betting on a measured move up based on the 3-bull bars may have some difficult choices if the market has a deep pullback. What I mean is if you are long here, stop placement becomes difficult. Even if the market sells off to the May 25 low, there will probably be buyers down there, so it is a bad area to exit along.
• Overall, the bulls want a measured move up based on the rally up to May 27 tested the April 18 low and, the bears want a bear breakout and measured move down to the May low.  

Emini 5-minute chart and what to expect today

• Emini is down 35+ points in the overnight Globex session.
• The market will gap down and likely test the June 2 low (4,072.25).
• Bears will try and close under the May 18 breakout point (4,095).
• The bulls want today to have a bull close and prevent the bears from getting a strong bear bar.
• Traders should watch out for a possible opening reversal up since the market is at the two support levels mentioned above.
• Since the market is likely to gap down, the odds will favor a sideways open and test of the moving average.
• As I often say if a trader, has difficulty trading the open, they should consider waiting for 6-12 bars. The open usually have lots of reversals because the market decides on a fair price. Most of the time, if a trader sits back and waits for 6-12 bars, they can avoid the ones that do not end up going far.
• If a trader is not comfortable with limit orders, they should wait for a credible stop entry, such as a second failed breakout of the June 2 low (double bottom), or wait for a strong breakout with follow-through.
• The most important thing to remember on the open is that the initial move has a 50% chance of reversing and going the opposite direction, which is why it is important to be patient on the open.

Yesterday’s Emini setups

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.

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 bears are trying to get three consecutive bear bars and a bear breakout below a bull flag.
• The bears hope that they can reach the May 23 low and 50% pullback of the May 30 rally. The bears will ultimately try and test the May 13 low. Also, the bears are trying to close the May 6 breakout point gap.
• The bulls will see any selloff as a higher low major trend reversal that will lead to a second leg up from the May 31 rally and test the April 21 high.
• Right now, the odds favor a higher low and the bears failing to fall below the May 13 high.
• The market is in a trading range, so the selloff could be deeper than what traders want.
• The bears will try hard to get a big bear breakout with follow through or 3-5 consecutive bear bars, which would increase the odds of lower prices. The bulls know this and will try to prevent strong consecutive bear bars.
• Right now, it looks like the odds favor a pullback and test of the May 23 low (red box) and a test of the 50% pullback level (blue line) before the market can go much higher.

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

Al created the SP500 Emini chart.

End of day summary

• Today was a trend from the open bull trend.
• The market gapped down and rallied to the moving average where the bulls got a bull breakout of a bear flag at 7:30 PT. In general successful bull breakouts of bear, flags lead to a second leg up.
• The bears were hoping that the rally up to 7:50 would lead to a 2nd leg trap and an endless pullback. However, most successful 2nd leg traps do not contain eight consecutive trend bars that make up the 2nd leg.
• The bears tried to get an endless pullback. However, it led to a breakout test of the 6:55 high and a 50% pullback of the bull rally that ended at 7:50.
• The bulls who bought the close of 7:50 and held long during the selloff to 9:20 were deciding if they should exit early on any bounce or hold long for a test of the 7:50 close. After the three consecutive bull bars up to 9:35, those bulls were willing to have a test of 7:50. 
• At 10:25, some bulls took profits at the 7:50 close. However, the rally up to 10:25 was a very tight channel that the odds favored a second leg up.
• The bulls got a buy the close rally at the end of the day. One thing to point out is when the market enters a buy the close rally before 12:30; it usually has a hard time continuing as a buy the close rally up until the final bar, which is part of the reason for the 13:00 two bar selloff (most bulls would exit here).
• Overall, the rally up to 7:50 was a strong major reversal that was likely to lead to a bull trend or a trading range day. This means that traders would be looking to buy a pullback, especially if the pullback has a couple of legs down, such as 9:25.
• Today was a strong bull close on the daily chart. The bulls will try for a strong follow-through bar, increasing the odds of the May 27 measured move up and test of the April 18 low.

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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