Trading Update: Tuesday March 28, 2023
S&P Emini pre-open market analysis
Emini daily chart
- The market is continuing to go sideways around big round number 4,000. This has been an important magnet for almost a year. The market will likely continue to oscillate around 4,000 for some time.
- The bulls had a decent entry bar last Friday; however, as expected, yesterday was a bad entry bar for the bulls. This will weaken the bull argument of last Friday, leading to a swing trade and a test of the March 6th high.
- Strong breakouts trap limit order traders fading the breakout. If the bulls had gotten a strong bull bar yesterday, that would have trapped limit order bears selling above last Friday’s high and increased the odds of higher prices.
- The market can still get an upside breakout. However, the probability is lower now.
- The bears see yesterday as the pullback from last Wednesday’s outside down bar. Next, the bears want today to trigger the sell below yesterday.
- The odds are that there are buyers below yesterday. However, if the bears can get a strong entry bar today, that might trap limit order bulls who would have bought yesterday’s bear bar below. If the bulls get trapped, that could be enough to create a downside breakout.
- The most crucial thing to realize is that the market is in a tight trading range, breakout mode.
- Until there is a strong breakout with follow-through, the odds are that the market will continue to go sideways. This means traders should expect breakouts to fail until there is a clear breakout with follow-through closing beyond support or resistance.
Emini 5-minute chart and what to expect today
- Emini is down 12 points in the overnight Globex session.
- The Globex market is testing yesterday’s lows. However, the selloff that begins in the early morning hours looks like a bear leg in a trading range.
- Yesterday’s low will be an important magnet for the market today.
- As mentioned above, the bears want a strong breakout below yesterday’s low and for today to close below it. More likely, the market will find support at yesterday’s low.
- As I often say, traders should expect the market to go sideways for the first 6-12 bars. This means traders should be prepared or limit order trading during the first hour until there is a clear swing setup.
- Most traders should try and catch the opening swing trade. There is greater than an 80% chance of a swing trade beginning before the end of the second hour. One usually happens after the formation of a double top/bottom or a wedge top/bottom.
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 near 4-year library of more detailed explanations of swing trade setups (see Online Course/BTC Daily Setups). Encyclopedia members get current daily charts added to Encyclopedia.
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 formed a High 1 buy signal bar yesterday. It follows a two-bar selloff, which will lower the probability of the buy.
- The rally up to March 23rd is strong enough to lead to a second leg up. This means bulls will buy above yesterday’s High 1 buy signal bar and likely scale in lower, betting on a second leg up.
- The bears see March 23rd as a lower-high major trend reversal. However, there are too many bull bars up to the March 23rd high. This will lower the probability of the bears selling below March 23rd.
- Overall, the market is probably going above the March 23rd high and will begin to go sideways and continue the trading range price action.
Summary of today’s S&P Emini futures price action
Al created the SP500 Emini charts.
End of day review
- Live stream video trial replacement of end of day review coming soon.
See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.
Trading Room
Al Brooks and other presenters talk about the detailed Emini price action real-time each day in the BrooksPriceAction.com 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.
Any insight if there were clues at the close of bar 13 that it was going to be a bear trap? Strong looking bear bar closing on it’s low and below the lows of the prior twelve bars would have made me think it was a decent breakout bar for the bears.
Hi Mat
Al addresses this in the 28/3 encyclopedia image. Its the shape of the ii bars.
The problem with bar 13 is that it is a sell climax bar on a day that is mostly a trading range day.
In general, when you see a big bar that is significantly bigger than the rest of the bars, it is generally better to wait and see the follow-through or wait for a pullback.
I think of bars like 13 as emotional breakouts. They force one to get scared and jump into the market in panic, fearful that they will miss a big bear trend.
The other problem with bar 14 is it is fallowing a lot of bull trend bars during the rally up to bar 10. Strong bear trends do not typically get this much buying pressure. The bulls bars increased the risk of a trading range day.
Lastly, bar 13 tells us two things:
1) It is a major surprise, so expect a bear trend or a Trading range day.
2) It is a big enough bar to expect a 2nd leg down. This means that there are sellers somewhere above. So if a trader sells the close of bar 13 and scales in higher, they will probably make a profit or avoid a loss at a minimum.
Curious as to the context around bar #57 being a viable swing trade (other than the wedge bottom 2nd entry), since it is basically a bull doji, not an inside bar, and did not close above 56? Our there other factors?
This is a common issue with pullbacks and bar counting. Bar 57 closed above the _close_ of B56, not the high as you (correctly!) note.
I know Al’s glossary refers to “…the next bar in this correction whose high is above the prior bar’s high is a high 2” but Al often breaks this rule. 🙂 I am hoping Al will record a Bonus Video on topic to clarify when the strict definition does not count.
So a legitimate High 2, plus the wedge bottom 2nd entry as you state.
Bar 57 is a pullback from the bar 55 bull breakout bar. If you think about it, bar 55 is a breakout, and breakouts typically have 2nd legs. This means the market so goes at least one tick above bar 55.
Also, breakouts typically have symmetry in the form of Leg 1 = Leg 2. This means that if a trader buys above bar 57, they have a reasonable chance of getting some 2nd leg up after the 55-breakout bar. This is, in part, why bar 59 sold off. It is almost expect Leg 1 = Leg 2 of bar 55 (leg 1), bar 57 low is the pullback, and the rally up to bar 59 is leg 2.
The problem with bar 57 is that it is a trading range bar. Trading range bars typically have a magnetic pull back to the bar, which increases the risk that the bulls will scalp buying above bar 57.
Also, another important note is that the selloff down to bar 54 is tight. This means bulls will probably need a major trend reversal. This makes bar 57 minor at best and likely to lead to a trading range more than an upside breakout.