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Emini will likely reach February low

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Trading Update: Thursday May 26, 2022

Emini pre-open market analysis

Emini daily chart

  • Emini bulls are trying hard to form a bottom and getting enough buying pressure to likely reach February low and the moving average. It looks like the bulls will reach those targets, but it might take until the end of next week.
  • Even though 8 of the past 10 bars on the daily chart have been bull bars, which is a sign of buying pressure by the bulls, the market is still in a tight trading range since May 9th.
  • The bulls need consecutive bull bars breaking above the moving average to convince traders that the market is always in long and likely going higher. An example of this would be the rally up to March 18.
  • While the odds favor higher prices, we could easily have another leg down and go below May 19 low.
  • The channel down from March 29th is strong enough that the first reversal up will likely be minor, and the bulls will need a more clear major trend reversal.
  • While the bulls have a lower low major trend reversal on May 20, it is only 3-4 bars up and 3-4 bars down, which is not enough bars.
  • Bears will try hard to keep the February 24 breakout gap open. The bulls tried to close on the back on May 17th but failed. So the bears still have a possible double top bear flag (February – April) and a possible measured move down to around the 3,600 price level.
  • As I said above, the odds are the February 24th gap will probably close in the next week or two.
  • The week’s open is an important magnet due to the seven consecutive bear bars on the weekly chart, and the bears are unlikely to get eight consecutive bars. This means the market will likely close above the open of the week and possibly far above it on Friday.
  • Overall, the market will try to test the moving average today or tomorrow, and the bears want to reverse yesterday’s bull trend bar.

Emini 5-minute chart and what to expect today

  • Emini is up 25 points in the overnight Globex session.
  • The Globex market has rallied since the start of today’s session (last night). However, the rally is in a broad channel, increasing the odds of the bears selling off today. 
  • As I am typing this at 5:30 AM PT, a report has been released, and the market is trying to break out to the downside and test the middle of a triangle that formed from yesterday at 12:00 PM PT to 1:30 AM PT.
  • The Globex bull breakout at 4:30 AM PT may set up a final flag, meaning the market will have to test the 3,977 price level, which is the center of the triangle stated above.
  • The day session will have an opening gap, which increases the odds of trading range price action on the open.
  • As often stated, if a trader has trouble on the open, they make sure they are not buying high and selling low and betting on breakouts, especially on the open, since most breakouts fail. Also, they can consider waiting for 6-12 bars to gain more clarity on the day.
  • Traders should consider waiting for a credible bottom such as a double bottom/top, wedge bottom/top, or a strong breakout with follow-through that breaks above/below obvious resistance/support levels.

Yesterday’s Emini setups

Emini bull trend from the open then parabobilic wedge and a breakout test followed by trend resumption up. LIkely to reach February Low.

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

EURUSD Forex Daily Chart Bull Breakout Strong Enough to Test April 21
  • The bulls are trying to get a second leg up after the pullback from the 8-bar micro channel.
  • The market is probably always in long, with the two consecutive bull bars closing above the moving average. However, this may be a 20-gap bar test of the moving average, and the market may have a deep pullback before it can go higher.
  • Traders know that the market is going to test the April 21 high. However, traders do not know the path the market will take to get there.
  • The 8-bar bull micro channel is a sign of strength by the bulls and increases the odds of higher prices. The problem the bulls have is that the channel down from March 31 is tight, increasing the odds of the first reversal being minor.
  • This means that the market might have a 50% pullback of the rally up to May 24, so if traders are buying here, they need a stop below May 13.
  • Overall, the rally up to May 13 is good for the bulls and a sign that the market is in the early stages of a bull trend or a trading range. The bears still have the argument of a bear trend unless the bulls get above March 31.
  • The problem the bears have is that the market has been in a bear trend since early 2021, which is over a year, and the odds favor a bull rally lasting at least a couple of months on the daily chart.

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

  • Al will post chart after the close.
Emini small pullback bull trend from the open then parabolic wedge top with pullback to the EMA where there was a 20-Gap Bar buy and a Moving Average gap bar buy

Al created the SP500 Emini charts.

End of day summary

  • The Emini gapped up on the open and was a small pullback bull trend that formed a trading range by the end of the day.
  • When you have a trend from the open bull or bear trend, there is a 60% chance the day will form a trading range. For example, today formed a trading range by the final half of the day, which is typical of a trend from the open.
  • Although the market rallied quickly during bars 1 and 2, it is a gap-up trend from the open day, which means traders want to buy a pullback to the moving average.
  • Traders will buy a small position on the close of bars 1 and 2 just in case the market keeps going up as it did for the first hour. It can be tough to get long on the open, especially when the bull bars are racing up aggressively; however, if one can trade small, it is essential to at least put a short position on.
  • Bar 1 and 2 were strong enough to make the market always in long and strong enough for a second leg up and possible measured move up from the open of bar 1 to the close of bar 2.
  • The bulls bought all the way up to the close of 7:30 PT. However, many traders would be less willing to buy the close of 7:15 and 7:20 PT due to both of the bars having big bull bodies late in a buy the close rally.
  • When you get a strong buy the close rally on the open like today, the best the bears can typically expect is sideways for many bars to the moving average and a trading range.
  • It is possible the rally during the first hour was a parabolic wedge top, and the bears would get a reversal. However, that is a low probability, and the odds favored sideways to up at a minimum.
  • The bulls got 11 consecutive bull bars on the open, which signifies very eager buying and climactic behavior. Extreme climactic behavior increases the odds of trading range price action, so it was possible the market could have gone sideways for several bars and entered breakout mode.
  • By 10:20, the market had formed a parabolic wedge top (9:05, 9:35, 10:20). As Al pointed up in the chart write-up, there is an a99% chance the market was going to have at least one bar with a low below the moving average, so most traders would not be willing to buy up here for that reason.
  • The market ended up going sideways for the rest of the day.
  • Overall, today was a strong trend day for the bulls.
  • Today also formed a gap with the low of today’s bar and the high of yesterday’s close, which is another sign of strength.

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

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.

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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