Trading Update: Wednesday May 22, 2024
End of day video review
S&P Emini pre-open market analysis
Emini daily chart
- The Emini triggered Monday’s bad sell signal bar yesterday and closed on its high. The problem the bulls have is that the market is forming a tight trading range late in the rally. This increases the risk of a possible final flag.
- The bulls are hopeful that today will trigger the buy above yesterday’s high and form a strong entry bar.
- The bulls have a problem: the market is in a 4-bar tight trading range far from the moving average. This increases the risk of sellers being above the tight trading range, creating a potential final flag.
- Traders are becoming less willing to buy far from the moving average. The moving average is a reflection of the fair price.
- Traders are happy to buy above the fair price as long as there is strong momentum to the upside. However, once the market loses momentum, traders will only consider buying closer to the moving average.
- The market can reach the moving average by going sideways, dragging the average price up, or selling off to the average price.
- The bears want a higher high major trend reversal. The problem with this argument is that the rally up from the April low is tight and increases the odds that the first reversal down from the April low will be minor.
- The bears will likely need a trendline break of the April rally and the formation of a lower high major trend reversal, which is a head and shoulders top. Most successful higher high major trend reversals form a lower high major trend reversal. This means that there is no rush for bears to enter.
- Overall, the odds favor a test of the moving average on the daily chart, and the market is deciding whether it will sell off to the moving average or continue to go sideways and drag the average price up.
Emini 5-minute chart and what to expect today
- The Globex market went sideways to down during the overnight and early morning hours.
- Traders should expect today to have a lot of trading range price action on the open, especially since the daily chart has had several consecutive overlapping bars.
- Traders should consider waiting for 6-12 bars before placing a trade unless they can make quick decisions.
- Most traders should try to catch the opening swing that often begins before the end of the second hour, after the formation of a double top/bottom or a wedge top/bottom.
- Traders should pay attention to yesterday’s high as it is a reasonable magnet for the market to test.
- The most important thing on the open is to be patient. If one is confused about what to do, one should consider stepping aside and waiting until clarity, even if this means not taking a trade for hours.
Yesterday’s Emini setups
Al created the SP500 Emini charts.
Here are reasonable stop entry setups from yesterday. I show each buy entry bar with a green arrow and each sell entry bar with a red arrow. 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.
Summary of today’s S&P Emini price action
Al created the SP500 Emini charts.
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.
