Emini Testing Moving Average

Trading Update: Friday May 24, 2024

S&P Emini pre-open market analysis

Emini daily chart

• Yesterday, the Emini formed a large outside down bar on the daily chart, which was a test of the moving average. This is a strong enough surprise that the odds favor a second leg down.
• Yesterday’s downside breakout was climactic and increased the odds the market has to pull back before the bears can get their second leg down.
• A logical magnet for the market to test is yesterday’s midpoint (5,315.75), which might get tested sometime today.
• The daily chart is far away from the moving average and goes sideways.
• When the market begins to go sideways far above the average price, less traders are willing to buy high. Traders are happy to buy far above the moving average as long as the momentum is strong. Once the momentum stalls, traders look for value, such as the moving average.
• Traders will see the market as expensive and want to buy closer to the fair price, the moving average.
• Yesterday was due to the market testing the moving average.
• The bulls are hopeful that yesterday’s downside breakout will trap the bears into bad shorts. While this is possible, yesterday’s bar is big enough that there are probably sellers above the bar. This means that the odds favor the Bears getting a second leg down.
• Overall, yesterday was a climatic bar; therefore, today will probably disappoint the bears. Traders are hopeful that any rally will be limited and lead to a resumption and a test of Thursday’s low.

Emini 5-minute chart and what to expect today

• The Globex market rallied in a bull channel for most of the overnight session due to the climatic selloff yesterday.
• Traders should expect today to disappoint the bears. This means that today will probably not form a strong entry bar for the bears.
• Traders should expect today to have a lot of trading range price action. This means that traders should be cautious on the open and wait for a clear breakout up or down. They can also wait for a credible double top/bottom or a wedge top/bottom.
• Today is Friday, which means weekly support and resistance are important. The open of the week (5,328) is a logical magnet for the market to try and test.
• Traders should be prepared for a possible surprise breakout late in the day as traders decide on the outcome of the weekly chart.

Emini Intra-Day Update

• The Emini gapped up and formed a second entry at the moving average with bar 6.
• The bulls formed a surprise breakout on bar 7, which was a big enough bar to increase the odds of a second leg up.
• As of bar 21, the market is Always In Long and in a buy the close rally. (However, the market is far from the moving average, which increases the risk of a pullback.
• Bar 29 was a credible wedge bottom at the moving average. The odds favor a test of the Bar 21 high close, which is what the market is deciding on right now (bar 34).
• The bears want bar 36 to become a double top, lower high major trend reversal with bar 25.
• The bears need a clear breakout below the moving average before traders become convinced that the double top will become successful.

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.

End of day video review

End Of Day Review was presented in the Trading Room today. See below for details on how to sign up.

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

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.

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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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