Trading Update: Wednesday May 31, 2023
S&P Emini pre-open market analysis
Emini daily chart
- The Emini formed a strong bull breakout last Friday; however, today’s follow-through was disappointing. Bulls need follow-through buying.
- The bears have the argument of a wedge top and want the bad follow-through to continue today.
- The odds favor a second leg up after last Friday. However, the risk of a wedge bottom is real. This means the bears have a credible chance of forming another bear bar today.
- If the bears can get 2-3 bear bars closing on their lows, traders will begin to conclude that the market is forming a wedge top.
- The bulls need to get follow-through buying today and trap the bears who are selling.
- There are trapped bears who sold on May 25th, betting on a second leg down after the May 24th selloff. These bears are disappointed and will likely be interested in exiting the trade break-even. However, if the bears can develop more selling pressure, those trapped bears may consider staying short and betting on a wedge top.
- Overall, traders will pay close attention to the next few days to see how determined the bulls are to get a second leg up.
Emini 5-minute chart and what to expect today
- Emini is down 21 points in the overnight Globex session.
- The Globex Market has gone sideways during the overnight Globex session.
- Traders should be open to anything today for the reasons stated above. The bulls want follow-through buying, and the bears want another bear trend bar to disappoint the bulls on the daily chart.
- Traders should assume the day will have a lot of trading range price action until proven otherwise.
- As I often say, most traders should assume the day will have a lot of trading range price action over the first hour. This means that most traders should consider not trading during the first hour of the day.
- Most traders should wait for the opening swing trade to develop and look for a credible stop entry. It is common for the opening swing to form after a credible double top/bottom or wedge top/bottom before the end of the second hour.
- Today is the final trading day of the month. This means that traders should be mindful of a surprise breakout in the afternoon as traders decide on the closing price of the monthly chart.
- Lastly, traders should pay close attention to the open of the day as that will likely be an important price level, especially if the day has a lot of trading range price action.
Emini intraday market update
- The Emini sold off from a bear trend from the open for the first 12 bars.
- While the bear selloff from bars 4-13 was strong, there was a 60% chance the market would evolve into a trading range.
- As of bar 45, the market has been going sideways for the past 3 hours and is deciding on trend resumption or trend reversal.
- While the odds slightly favor the bears getting trend resumption, the probability is close to 50% for both the bulls and the bears.
- Traders should be prepared for a breakout up or down, which may happen late in the day.
- With the rally on the first 4 bars of the day, traders should be prepared for a possible breakout back to the day’s open.
Yesterday’s Emini setups
Al created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The EURUSD has been in a tight bear channel for the past month.
- The market is getting close to support, which increases the odds of a bounce and a couple of legs sideways to up.
- Bears got trapped selling around the March 17th high, and the market is currently testing that same price level.
- Traders will wonder if the market will rally from this same price level as it did around March 17th. The bears who sold at this price level were disappointed with the follow-through and were likely forced to buy back shorts. The bears will be cautious about selling at the same price level (March 17th).
- The bulls hope that the market is forming a parabolic wedge bottom. However, most parabolic wedges are minor reversals. This means that the best the bulls can hope for is sideways to up. It’s possible that the market will get a strong reversal up. However, it is not likely.
- The bulls need a decent trendline break of the tight bear channel and a retest of the May low. That would create a more credible bottom. This means that the odds favor sideways for the next couple of weeks.
Summary of today’s S&P Emini price action
Al created the SP500 Emini charts.
End of day video review
Live stream video review with Brad Wolff. Here is YouTube link:
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.