Sequence 2, the Set-Up Event.

The Set-Up is kind of like the first impression on a date. It all hinges on how you present yourself right out of the gates. If I were to start babbling on about witchcraft and black magic on a first date, I would assume the girl would probably motion for the waiter to bring the check. But let's think about that for a second, because as strange as that example may be when trying to bring it back around to writing a screenplay, it does fit. It kind of makes sense, actually. Why does it make sense? Because that set up is completely involving the main character at the moment. The main character is setting up future events - whether he knows it or not, he's presenting the beginning of a story. Even though the story will likely come to a quick end because your date is going to run out the door after the black magic comment, it still instigates the beginning of something - a reaction.

When circling back to a screenplay, and if you wanted to simplify this as much possible, your 2nd Act of your movie (or middle episodes of a serialized TV show, for example), is a reaction. That's pretty much all the 2nd Act is if you boil it down to the most basic element. A reaction to an event. That event is what sets up everything that is going to then happen in the middle of your movie, but...and here's the important point to remember...from a character perspective! I'll say that again: the set up event is what sets up everything that is going to happen in the middle of your movie from character perspective.