Emini market testing May 2 low

Trading Update: Monday May 9, 2022

Emini pre-open market analysis

Emini daily chart

• Friday closed as a doji bar with a small bull body around the May 2 low.
• Emini market testing May 2 low and bulls hope the market is forming a double bottom, which will lead to a test of the May 4 high around 4,300.
• Traders have to question why last Friday’s signal bar is a doji and not a strong bull bar closing on its high. Last Friday would not be a doji bar if the bulls were truly strong. This means there is something wrong with the bull argument, and the market may go lower.
• The bears hope that May 5 was a strong enough surprise that trapped eager bulls into buying too high in an overall trading range.
• The bears want a breakout below the May 2 low, a test down to 4,000, and possibly a test down to the 3,600-price level. This would be a measured move down from the February – April trading range.
• The bulls will see last Friday as bad follow-through by the bears and expect the bears to fail around this price level. The bulls will look to buy, hoping the market will test higher and possibly back to the April 18 low.
• The market is at a significant price level. The bears will try hard to get the downside breakout below the May 2 low, and the bulls will do everything they can to prevent this. This creates the potential for a big move up or down.
• I wanted to clarify a comment on the prior blog post regarding the monthly chart moving average. I made a statement that I believe the market may have to go lower to satisfy a test of the monthly 20-bar moving average, which I think is still likely. The reason for this is to look at a monthly chart for 20-period moving average and compare the current moving average test to every other touch of the moving average since 2008. You will notice this current test of the moving average went the least number of a points below the moving average, and the market is late in a trend. Pullbacks should get deeper as a trend goes on, which is why I think the market may have to go lower.

Emini 5-minute chart and what to expect today

• Emini is down 50 points in the overnight Globex session.
• The Globex market broke below the May 2 low during the overnight session.
• This means the U.S. day session may open near the May 2 low, which increases the potential of a big move up or down today.
• Traders should be open to the possibility of a trend from the open today. However, they should wait for a credible stop entry trade or a strong breakout with follow-through.
• Traders should also be aware of the size of the bars as they will likely continue to be big today, which means traders need to trade small.

Friday’s Emini setups

Al created the SP500 Emini charts.

Here are several reasonable stop entry setups from Friday. 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

• The EURUSD now has an 8-bar tight trading range.
• The bulls see a failed bear breakout of a bear channel and ultimately expect a test bear trend line (top of the bear channel) which would be around the March 31 high.
• The bulls also want a bull breakout of the 8-bar bear flag and a measured move up (purple line) of the bear flag projecting up to 1.0812 and the April 25 high.
• The 6-bar selloff that started on April 21 is also likely an exhaustive bear breakout. This means the odds favor the market reaching the April 21 high.
• The bears hope that the April 21 bear breakout will lead to a measuring gap and several legs down, reaching the 2017 lows.
• Overall, the odds are the market will soon begin to go sideways to up, or the bulls will get an upside breakout of the bull flag.
• The bulls hope today is an inside bar closing on or near its high and that the entry bar will be a strong breakout above the May 5 neckline of the double bottom (bears see it as a bear flag) that will lead to a measured move up.

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

Al created the SP500 Emini charts.

End of day summary

• The market gapped down on the open and sold off for the first two hours.
• The market reached the 4,000 big round number, went sideways for the rest of the day, and had a late bear breakout.
• While the day looks like a trading range day, it is a bear trend bar on the daily chart.
• Overall, the bulls had a strong reversal up around 8:30 PT. However, the reversal was likely to be minor and lead to more sideways trading. The bulls tried for a lower low major trend reversal. However, the bulls failed to get above the major lower high.
• The bears got a double top at 12:15 PT, leading to a selloff and new low of the day.
• Today was a strong close on the daily chart.
• The bears hope tomorrow will have follow -through, however more likely, tomorrow will disappoint the bears, and 4,000 will be a magnet. The market may have to sell off t0 3,600; however, the market will probably have to bounce first.

See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.

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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.

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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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