Bulls Need Follow-Through Buying Today
2023.05.31 10:35
S&P Emini pre-open market analysis
Emini daily chart
- The formed a strong bull breakout last Friday; however, today’s follow-through was disappointing.
- 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.
Yesterday’s Emini setups
I post every day. Because I often get questions about what charts Encyclopedia members see, today I am including the example below of that version.
Brooks-Encyclopedia-SP500-Emini-5-Min Chart
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 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.
