Emini reversing up from 19% correction

Trading Update: Monday May 16, 2022

Emini pre-open market analysis

Emini daily chart

• The Emini reversed up over the past two trading days from a 19% correction.
• The bulls hope that Thursday will be the low of the next several weeks and possibly months.
• While this may be the low, the channel down from the February high is tight, and the market may have to reach a 20% correction which would be 3,824.
• So far, last Friday’s entry bar is good for the bulls; however, in order for the market to become clearly always in long, the bulls need more bull bars closing on their highs.
• The market will likely test the February 24 low sometime this week. It was a reasonable place to buy, so there will probably be scale in bulls who bought that price level and lower, confident the market would get back to the February 24 low.
• The market also had a credible stop entry on May 2. Some bulls would be willing to buy the May 2 stop entry and lower confident the market would return to their entry price.
• At the moment, the selloff down to May 12 looks like a bear leg in what will become a trading range. This means the odds favor the bulls getting a bull leg in what will become a trading range and the market possibly testing the 4,300 top of the bear channel around May 4.
• The bulls want strong buying pressure here in the form of consecutive bull close to increase the odds of the market becoming always in long and testing higher. The bulls hope that the market will reverse back to 4,500 and possibly the All-time high.
• The bears hope that the rally up will be weak and find sellers. The bears want to prevent the bulls from closing the February 24 breakout point and trap the scale in bulls and force them to sell out of their longs for a loss.

Emini 5-minute chart and what to expect today

• Emini is down 7 points in the overnight Globex session from Friday’s close.
• The market will likely open with a gap.
• The bulls want continued buying on the daily chart and hope today closes far above the open. 
• More likely, today will disappoint the bulls and close as a trading range day which would disappoint the bulls.
• Traders should expect a trading range open and sideways trading.
• Most traders should wait for a credible stop entry or strong breakout with follow-through.
• If a trader has trouble on the open, they should consider waiting for 6-12 bars before placing a trade. This is because most days have a 50% chance of a major reversal of the initial move.

Friday’s Emini setups

Al created the SP500 Emini charts.

Here are several reasonable stop entry setups from Friday. 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 bulls hope today will be a strong entry bar reversing Thursday’s breakout.
• The EURUSD had a bear breakout below the 10-bar tight trading range last week. The follow-through so far has been bad, which is a sign of likely exhaustion and that the tight trading range will become a final flag.
• The bears hope that the May 12 bear breakout is strong enough for a second leg down.
• The 2017 low is at 1.0339, which is 80 pips away from the current market price. This is close enough that the market may have to reach it and fall below Friday’s close.
• The bulls that bought about last Friday’s (5/13) bull reversal bar are likely willing to scale in lower.
• Overall, the bulls want a strong entry bar today, and the bears want to reverse Friday’s buy signal bar. The market will likely reach the May 12 high soon.

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 was a broad trading range day.
• Trading range days can be challenging because, by the time the market is clearly always in long or short, the market is near and extreme. For example, the market was probably always in long around 7:40 PT. However, it is at the high of bar 3 and the previous day’s close, which are resistance areas.
• Buying at 7:30 is betting on a successful breakout of a trading range, and the math is difficult to structure. This is why Al says to avoid buying at the top of a trading range or selling at the bottom of the trading range.
• The other challenging part with today is that the reversals are never clear. For example, bar 7 is a bad-looking signal bar to buy above, but the context makes sense (bears were disappointed and bought back shorts).
• Overall, traders are betting on failed breakouts and looking for second entries and wedges at the top and bottom of the range.

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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