Trading Update: Friday May 17, 2024
S&P Emini pre-open market analysis
Emini daily chart
- The bears formed a bad follow-through bar yesterday, following Wednesday’s strong bull breakout bar. The rally up to the May high is strong enough to expect the first reversal down to be minor. This means that there are likely buyers below scaling in lower.
- The bears are hopeful that they will be able to get a series of strong bear closes and trap the bulls into buying at the previous March all-time high.
- It is unlikely for the bears to get a successful reversal without first making the market go sideways for several bars. This means that there are likely buyers below yesterday’s low.
- The Bears want the rally up to the March all-time high to become a major trend reversal. The problem the bears have is that the rally up from the April high is tight. This increases the odds that any major trend reversal setup will be minor, leading to trend resumption for the bulls.
- If the market is going to form a successful major trend reversal, there will be plenty of time to enter later once the bears have created more selling pressure. Most traders would rather see a trendline break of the current May rally followed by a retest. It would be best for the bears if they can get a series of lower highs as a sign of strength.
- The April 29th high breakout point trapped the Bears into losing shorts. If the bears can increase the selling pressure, the market will probably get a sell vacuum test of the April 29th low and close the gap.
- Overall, the May rally is strong; therefore, the first reversal down will likely be minor. This means that the first reversal down will likely be limited and find buyers below.
Emini 5-minute chart and what to expect today
- Emini is up 4 points in the overnight Globex session.
- The Globex market has gone sideways on the 15 0 minute chart for most of the overnight session.
- The daily range of the Globex session is 13 points. This means that the odds are the open will double the range at a minimum.
- Yesterday’s low is an important magnet today. The bears want to break far below yesterday’s low and create a strong entry bar on the daily chart.
- The bulls want the opposite and for today to form a bull reversal bar closing on its high. This would be a High 1 buy signal bar.
- Traders should expect the open to have a lot of trading range price action. Most traders should consider waiting for 6-12 bars before placing a trade. Unless they can make quick decisions and are able to change their opinion.
- There is an 80% chance of a trading range open and only 20% of a trend from the open. This means that there is an 80% chance of breakouts reversing on the open.
- It is common for trading ranges to form a variation of a double top/bottom or a wedge top/bottom. This means that traders should look for one of these patterns on the open.
- Most traders should try and catch the opening swing that often begins before the end of the second hour, after the formation of one of the above-mentioned patterns. The opening swing often lasts for at least two legs and two hours, providing a great risk-reward trade with a decent probability for stop-entry traders.
- Today is Friday, which means weekly support and resistance are important. Traders should be ready for a surprise breakout late in the day as traders decide on the close of the weekly chart.
- Lastly, the most important thing in the open is to not be in a rush. If a trader is not sure of what is going on or things they do not have a good trader’s equation, they should stay flat and wait for clarity.
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 will be 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.
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.
