Friday’s E-mini Setups
E-mini was testing the 3,800 big round number, trying to decide whether it should go lower to find buyers. The 3,800 level is a 20% correction from the all-time high, which long-term buyers (value investors) find attractive, and would be happy to buy a 25%, 30%, or even 40% correction because they see the market at a discount and an excellent opportunity to buy at a cheap price.
Bears want a successful breakout below the May 20 low, and while it is possible, it is more likely there will be buyers at this price level.
Today will likely disappoint the bears, and the market will find buyers at the May 20 low; however, the bulls may give up, and the bears will get their breakout. It will be important to see if today is a bull or bear close.
The channel down to May 20 was tight, and the rally up to June 1 was a strong trendline break. The bulls will hope that the current selloff is just a test of the May 20 low and the market will form a double bottom here and test up.
The selloff down over the past couple of trading days is strong enough that the bulls will probably need some kind of a micro double bottom before the bulls can get a credible buy.
Overall, the market reached a significant support level during the Globex hours (May 20 low, which is a 20% correction). Traders will be eager to see if there are more buyers or sellers at the May 20 price level.
E-mini 5-minute chart and what to expect today
E-mini was down 90+ points in the overnight Globex session. As stated above, the Globex market is testing the May 20 low, which is the 20% correction level. This means the market will have a large gap down on the open.
Traders should expect a trading range open and sideways to the moving average before a big move happens.
Since the gap is big, there is an increased risk of a trend from the open. If that happens, there is a 60% chance that the market will form a trading range at some point in the day. There is a 20% chance that any trend from the open up or down will last all day.
There is also a 50% chance the initial move up or down will reverse. This means there is a 50% chance that the initial move up or down is wrong and goes the opposite direction.
As I often say, if a trader has trouble on the open, they should consider waiting for 6-12 bars before placing a trade. This is because the market often goes sideways on the open.
Lastly, traders should also consider waiting for a credible stop entry such as a double bottom/top, wedge bottom/top, or a strong breakout with follow-through. The bars are big, so traders must ensure they can properly handle the increased risk.
Overall, today has the potential to be a big trend up or down due to the market testing the May 20 low. More likely, today will have a lot of trading range price action and disappoint the bulls and bears.