Trading Update: Friday May 13, 2022
Emini pre-open market analysis
Emini daily chart
- The Emini yesterday closed as a bull reversal bar with a big tail above. While the signal bar looks weak, the context is good for at least an Emini likely bounce for a day or two.
- Yesterday reached a 19% correction on the higher time frames and bounced. This is likely due to eager traders/investors wanting to buy a 20% correction but worried the market would not reach it, so they bought just above it just in case the market turned up.
- The market also has the 4,000 big round number above. This was an important price level, so there may be scale in bulls who bought 4,000 and lower, confident the market would get back to 4,000. This means the market will likely have to get near it.
- While the odds favor a small bounce, the channel down is still tight, which means any reversal up is likely to be minor, and the best the bulls can expect is a minor reversal without first forming a micro double bottom.
- It is possible the bulls get consecutive strong bull bars reversing the selloff of the past three days (not likely). If the bulls get a successful bull breakout, more and more bulls will start buying.
- Today is Friday, so weekly support and resistance are important.
- The bulls want to reverse this week as much as possible. Their first goal is a close above this week’s midpoint (3,962), which would disappoint the bears.
- The next target for the bulls would be the open of the week (4055.5), which is around 80 points away from the Globex price, so not likely.
- The bears want to prevent the bulls from closing above this week’s midpoint, making traders wonder if the market will go lower.
- The bears ultimately want this week to close near its low. However, it is not likely.
Emini 5-minute chart and what to expect today
- Emini is up 50 points in the overnight Globex session.
- The market will likely be a bull trend or a trading range day today.
- Traders will look for opening reversals to buy, such as a double bottom, wedge bottom, or bull breakout with follow-through.
- While the bulls may get a bull trend from the open, the market will likely have a trading range open and go sideways for the first hour. Remember, 50% of the time; the market will have a major reversal of the initial move.
- While the bears may get a close below today’s open, it is not likely.
- The bull wants today to be a strong entry bar following yesterday’s bull reversal bar.
- Overall, traders should be cautious on the open and expect a trading range for the first hour. If the market forms a trend from the open/trend day, there will be plenty of time to trade with the trend.
- Lastly, today is Friday, so the market has the potential to have a surprise move up or down in the final hours of the day to influence the weekly chart.
Yesterday’s Emini setups
Al created the SP500 Emini charts.
Here are several reasonable stop entry setups from yesterday. 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
- Yesterday, the EURUSD closed as a strong bear bar closing near its low. The bears want follow through today, the bulls want a bull reversal bar.
- Yesterday is a surprise bar, and the odds favor a small second leg down. The problem the bears have is this bar is likely to be an exhaustion bar and the second leg down from the April 21 six-bar selloff.
- The market formed a 10-bar tight trading range right before yesterday’s bear breakout. Traders are wondering if the market will reverse back into the tight trading range from the past two weeks and form a final flag.
- Ultimately, the market will likely have to get back to the March – April trading range lows.
- The 2017 low is only around 50 pips away (1.0339), so the market may not be able to escape the gravitational pull of the 2017 price level. This means that this could be a sell vacuum test of the 2017 low, and the market may have to reach it in the next couple of trading days.
- Today is Friday, so weekly support and resistance is important.
- The bears want today to close near its low, increasing the odds of lower prices. The low of the week is 1.0354, so it is not far from the current price.
- The bulls want to create a strong rally today and try to close the market as close to last week’s low (1.0482) as possible. This week’s midpoint is also a target for the bulls (it would disappoint bears if it closed there). However, it is near the same price as last week’s low.
- The bulls will probably not be able to reach last week’s low since it is so far away. The best the bulls can hope for is to create as big of a tail as possible.
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
- Today was a bull trend from the open that formed a trading range.
- The bulls got a trend from the open during bar 3 that led to a rally for around 2 hours.
- Traders wanted to buy at the moving average. However, the bulls were worried it would not get there for a long time.
- This caused traders to buy every pullback (including bear bars)
- While the rally up was a small pullback bull trend, there were a lot of doji bars and sideways price action, which made it look more like a bull leg in a trading range rather than a bull trend.
- the bear selloff down to 11:00 PT had problems as well. The bear bars overlapped the prior bar and had bad follow-through, a sign of a bear leg in a trading range.
- The strong 3 bar breakout down to 11:000 PT was more likely exhaustion and a sell vacuum test of the open of the day than a successful start of the bear trend.
- Lastly, the bulls got a bull breakout of a bear flag around 12:00 PT, leading to a buy the close rally late in the day.
- Overall, today was a strong entry bar for Thursday’s stop entry bull reversal bar on the daily chart.
- The bulls hope that Monday will gap up and be another strong bull close; however, Monday will likely disappoint traders.
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
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.
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.
