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E-Mini: Traders Should Expect Short-Term Pullback, Sideways Trading

Published 03/22/2022, 09:36 AM
Updated 07/09/2023, 06:31 AM
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  • Yesterday was a doji with a bull close on the E-mini.
  • It was also the 5th consecutive bull bar, which significantly increased today’s odds of having a bear close.
  • The odds are the market will have a 1-3 day pullback, and yesterday may be the start of the pullback.
  • The daily chart is in a trading range, and the market is currently in the middle of the range. In general, the middle of a trading range is always a bad area to buy or sell; however, since the bulls had a strong breakout, it increases the odds of a second leg up.
  • The point I am trying to make is that the market is in the middle of a trading range so that the bulls could become disappointed quickly. What would disappoint the bulls? Some kind of micro double top or an endless pullback would be enough to confuse traders further.
  • While the odds are the market will go higher and possibly test the all-time high, one must remember that the probability is not as strong as it looks. Trading Ranges always make high probability outcomes closer to 50% and low probability outcomes closer to 50%.
  • The bulls want a measured move up from the bull breakout above the March 3 double top, which projects up to 4,666.25. The bulls also want to keep the gap open from the breakout above March 3 (bull breakout bar on March 18).
  • Traders have to realize that this rally might be, in part, the bears stepping aside because they want to sell higher. Technically this happens on every bull breakout. What I mean is that the market is in a trading range, so the bears want to get lower highs. Even if the market rallies all the way back to the 4,600 price level, there will be aggressive bears who will sell to try and get the lower high and get another selloff to the March low.
  • Overall, traders should expect a 1-3 day pullback and sideways trading.

    • E-mini 5-minute chart and what to expect today

    E-Mini 5-Minute Chart

    • The Globex overnight market had a tight channel down, leading to sideways to up trading during the early morning hours.
    • The bull rally from midnight to 1:50 AM PT was strong enough for a second leg up. The market is currently deciding if the market already had a second leg up or if the market will get a more convincing second leg up testing the Globex high.
    • Traders should expect a limit order market on the open. They should look to trade limit orders if they are comfortable, or wait for a credible stop entry such as a double bottom/top or a wedge bottom/top, or lastly, a strong breakout with follow-through that makes the always in direction clear.
    • Traders should expect today to close below the open and form a bear day on the daily chart. This is due to the five consecutive bull closes, and the odds do not favor a 6th straight bull day. 

    Yesterday’s E-mini setups

    E-Mini 5-Minute Chart

     

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