Trading Update: Wednesday June 7, 2023
S&P Emini pre-open market analysis
Emini daily chart
- The Emini Yesterday formed a High 1 buy signal bar, closing on its high. The bulls are hopeful that today will lead to test of August high with a strong entry bar following yesterday’s High 1 buy signal bar.
- This is a credible stop-entry buy for the Bulls betting on a second leg up after last week’s two-bar bull breakout.
- The bears hope that the High 1 buy signal bar has more sellers above, trapping the bulls into buying high.
- Even if more sellers are above yesterday’s high, the selling will probably be temporary. Most bulls buying above yesterday’s buy signal bar will probably be willing to scale in lower.
- Traders will pay close attention to today’s follow-through to see how determined the bulls are.
- The bulls want today to close as a strong entry bar following yesterday’s buy signal. If they are successful, that could trap the bears into a bad short (selling above yesterday’s high) and lead to higher prices.
- The market is at the 4,300 Big Round Number, which will probably act as a magnet. This means the market may go sideways at this price level.
- The bull has two reasonable targets above. The 4,400 Big Round Number and the August 2022 high.
- It was reasonable for the bulls to buy during the August rally last year, and those bulls that did buy got trapped on the selloff down to the October low last year. It was reasonable for the bulls to buy, which means there is a 60% chance that the bulls can break even on their first entry, with a profit on the scale in entries.
- The bears need to develop more selling pressure to convince traders that the bears have one. At a minimum, the bears need to form a micro double top, and even then, that would likely not be enough.
Emini 5-minute chart and what to expect today
- Emini is up 1 point in the overnight Globex session.
- The overnight Globex market has had a lot of trading range price action.
- Traders should assume that the open will also have a lot of trading range price action.
- As I often say, most traders should consider not trading for the first 6-12 bars unless they are comfortable with limit order trading.
- Today has the potential to be a trend day. The bulls want strong follow-through buying after yesterday’s high 1 buy signal bar. The bears want a failed breakout above the High 1 buy signal bar.
- Traders should pay attention to the formation of the opening swing, which often begins before the end of the second hour. It is common for the market to form a double top/bottom, or a wedge top/bottom, that leads to the open swing.
- The opening swing is essential because it can provide a decent probability of more than twice your risk. Also, there is at least a 40% chance that the opening swing will double the size of the opening range, providing good risk-reward.
- Lastly, traders should be open to anything and always remember what Al says: “Price is Truth.” A trader must never be in denial of the price action.
Emini intraday market update
- The Emini rallied on the open and triggered the High 1 buy signal bar on the daily chart. The bulls got three decent bull closes. However, the bears overwhelmed the bulls, and the market reversed down, forming an opening reversal.
- As of bar 33 (9:15 AM PT), the bears have done a good job getting a bear trend and a decent second entry short on the daily chart.
- The bear trend will probably evolve into a trading range before the end of the day. The bulls have achieved a lot of buying pressure overall with the first three bars of the day and the rally up to bar 25 (8:35 AM PT). This increases the probability that the market will probably find buyers below the bar 30 low (9:00 AM PT)
- At the moment there is a 60% chance that the market will test the bar 25 Close. Although it was a possible 2nd leg trap (which it was), it was a reasonable buy the close bar. This means that there is a 60% chance that the market will rally back to the close of bar 25. Bar 25 was not a great buy since the channel down was tight, meaning the reversal up on bar 25 was probably minor. However, it was a strong enough buy that the market should form a trading range.
- Bar 60, the market has formed a large spike and channel bear trend, within a larger trading range with yesterday. The bulls recently got a reversal up. It is important to remember that 75% of bear channels evolve into Trading Ranges.
Yesterday’s Emini setups
Al created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The EURUSD found buyers early this morning. The market will probably rally closer to the moving average (blue line) over the next few days.
- The tight bear channel that began in early May has probably evolved into a trading range. Most traders do not want to sell too low if the market is in a trading range. This makes the moving average a good measurement of what is considered “too low.”
- Since the moving average represents what is considered an average price or a fair price. This means that the bears selling here are selling below the fair price, a discounted price. Since a trading range is typically a neutral environment, the market will probably have to test closer to the moving average to attract more sellers.
- The bulls know this and are buying, betting that the market will need to test closer to the moving average.
- The bulls have done an excellent job getting the market to go sideways. Next, the bulls need to show further signs of strength. One way they could do that is to get consecutive trend bars closing on their highs, preferably above the moving average.
Until the bulls get further signs of strength, traders will assume any reversal up is likely minor.
Summary of today’s S&P Emini price action
Al created the SP500 Emini charts.
End of day video review
Here is YouTube link if your browser blocks video popup:
See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.
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.