Emini daily chart
o S&P 500 Futures are continuing to go sideways around big round number 4,000. This has been an important magnet for almost a year. The market will likely continue to oscillate around 4,000 for some time.
o The bulls had a decent entry bar last Friday; however, as expected, yesterday was a bad entry bar for the bulls. This will weaken the bull argument of last Friday, leading to a swing trade and a test of the March 6 high.
o Strong breakouts trap limit order traders fading the breakout. If the bulls had gotten a strong bull bar yesterday, that would have trapped limit order bears selling above last Friday’s high and increased the odds of higher prices.
o The market can still get an upside breakout. However, the probability is lower now.
o The bears see yesterday as the pullback from last Wednesday’s outside down bar. Next, the bears want today to trigger the sell below yesterday.
o The odds are that there are buyers below yesterday. However, if the bears can get a strong entry bar today, that might trap limit order bulls who would have bought yesterday’s bear bar below. If the bulls get trapped, that could be enough to create a downside breakout.
o The most crucial thing to realize is that the market is in a tight trading range, breakout mode.
o Until there is a strong breakout with follow-through, the odds are that the market will continue to go sideways. This means traders should expect breakouts to fail until there is a clear breakout with follow-through closing beyond support or resistance.
Emini 5-minute chart and what to expect today
o Emini is down 12 points in the overnight Globex session.
o The Globex market is testing yesterday’s lows. However, the selloff that begins in the early morning hours looks like a bear leg in a trading range.
o Yesterday’s low will be an important magnet for the market today.
o As mentioned above, the bears want a strong breakout below yesterday’s low and for today to close below it. More likely, the market will find support at yesterday’s low.
o As I often say, traders should expect the market to go sideways for the first 6-12 bars. This means traders should be prepared or limit order trading during the first hour until there is a clear swing setup.
o Most traders should try and catch the opening swing trade. There is greater than an 80% chance of a swing trade beginning before the end of the second hour. One usually happens after the formation of a double top/bottom or a wedge top/bottom.
Yesterday’s Emini setups
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 nearly 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.