Trading Update: Wednesday May 3, 2023
S&P Emini pre-open market analysis
Emini daily chart
- The bulls gave up yesterday on the idea of a strong second leg up following last Thursday and Friday’s bull breakout.
- The Emini is neutral going sideways into FOMC report today.
- The risk of being long following last week’s breakout was that the market was at the top of a month-long trading range.
- Some bulls bought the bull breakout last Friday, assuming the market would break out above the April high. However, they likely used a tight stop and were quick to exit when the market hesitated on Monday or yesterday.
- The bulls buying at the top of the trading range last Friday bought because the momentum was strong; however, when they sensed the momentum drying up, they would exit quickly.
- Some bears sold the April 2nd high, betting it was a bad signal bar in a tight bear channel and likely sellers above. Those bears bought back shorts back at the April 26th high yesterday.
- The Bulls knew April 26th was a credible location to buy, and they likely had limit orders there too.
- The odds are the market will return to the May 1st close, allowing the scale in bulls out. However, the Bears may get a second leg down first.
- A lot of bulls who bought the May 1st low likely bought more around the April 26th high. Because the selloff had strong momentum down, many of those bulls are sufficiently disappointed enough to be happy to exit breakeven on the entire trade, which is near 4,145.
- Overall, the market is returning to neutral before the FOMC report at 11:00 AM PT/ 2:00 PM EST.
- The past month has formed an expanding triangle and is in breakout mode, which means traders should be neutral going into the report and assume the probability is 50% for a measured move up or down based on the past month’s range.
Emini 5-minute chart and what to expect today
- Emini is up 8 points in the overnight Globex session.
- The overnight Globex market has gone sideways following yesterday’s strong selloff.
- The bears see yesterday’s selloff as strong enough to increase the odds of a second leg down.
- Traders should be open to a possible test of the lows of yesterday. However, because the pullback from yesterday’s low was so deep, the odds are that any selloff will form a higher low, and the market will continue sideways.
- Traders should assume today will have a lot of trading range price action. As I often say, most traders should wait for 6-12 bars before placing a trade unless they are comfortable with limit order trading.
- Most traders should try and catch the opening swing trade, which typically happens after the formation of a double top/bottom or a wedge top/bottom.
- The most important thing is not to deny what the price action is doing. Price is truth, and no matter what your opinion is, if the market is doing the opposite, you must react accordingly.
- Traders should be flat an hour before the FOMC report. Traders should wait for at least 2 bars following the FOMC release.
- Traders should be sure and trade small during the FOMC report as the bars can get very big. In general, most traders should trade a 20% position size.
Emini intraday market update
- The Emini has been in a trading range for most of the day.
- The bulls got a strong rally up to bar 7; however, the bears took control, and the market sold off down to bar 18.
- Because of the opening rally, the odds were that any selloff below bar 1 would be a trading range and not lead to a bear trend.
- Most traders should be flat for at least an hour before going into the report. It is easy to get trapped into a losing trade, using a wide stop and scaling it. This is why it s better to be flat and wait.
- In general, most traders should wait for the 2nd bar after the FOMC to close before trading.
- Since the bars will likely be big, trading small, such as 20% of one’s normal position size, is better.
- Traders should be open to anything going into the report. A big move can happen, however, the odds favor a trading range. Traders should also assume that any big breakout during the first bar of the report and quickly reverse and go the opposite way.
Yesterday’s Emini setups
Al created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The EURUSD tried to break out below the moving average (blue line) but failed to close below it and reversed up, forming a bull reversal bar.
- The bulls see this as another failed breakout attempt of the moving average. Next, the bulls want an upside breakout and a close above the tight trading range over the past month.
- More likely, the market will continue to go sideways.
- The bears see a 5-bar bull micro channel and expect sellers above the current bar’s high.
- I have said that the odds favor the channel up that began in March to evolve into a trading range. This means that the odds are the market will soon test prior higher lows like the April 10th low.
- However, the bears need to get close below the moving average. Until the bears get close to the moving average, traders will assume that all breakouts below the moving average will fail.
Summary of today’s S&P Emini price action
Al created the SP500 Emini charts.
End of day video review
YouTube End of Day Emini Review and Q&A with Brad Wolff:
See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.
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.
Do we see 4136 as the %50 pullback of May 1st high to May 2nd low.