Emini daily chart
- The S&P 500 Futures Bears want a measured move of the bull flag from the July 27th high to the August 11th low, projecting down to the 4,285-price level as well as the February 2nd high.
- The Bears formed a two-bar breakout below a bull flag on August 16th. The bear breakout below the bull flag is strong enough for a small second leg down.
- The selloff over the past three days is strong enough for the first reversal to be minor and lead to a pullback instead of a reversal.
- The bulls are hopeful that the selloff will lead to a sell vacuum test of support, such as the June 26th low. While this is possible, the selloff has strong momentum behind it. This increases the odds of a second leg down and lower prices.
- The bears want to test the February 2nd high, which is almost the same price level as the measured move projection mentioned above. This increases the probability that the market will have to get there.
- Overall, the odds favor a second leg down and lower prices. The bulls will need to form at least a micro double bottom before they have a chance at reversing the selloff. Even if they can get a double bottom, the odds favor a pullback, not a reversal.
Emini 5-minute chart and what to expect today
- Emini is down 24 points in the overnight Globex session.
- The overnight Globex market formed a second leg down after yesterday’s late selloff.
- Yesterday formed consecutive sell climaxes late in the day. There is a 75% chance of at least two hours of sideways trading beginning before the end of the second hour.
- There is a 50% chance of follow-through selling, followed by two hours of sideways trading beginning before the end of the second hour.
- There is only a 25% chance of a strong trend day.
- Traders should assume that the open will have a lot of trading range price action. This means that most traders should consider not trading for the first 6-12 bars unless they are comfortable with limit order trading.
- Today is Friday, so weekly support and resistance is important. The bears have a strong follow-through bear breakout on the weekly chart. They want this week to close on its low, and the bulls want to create a tail below the bar.
- Since today is Friday, traders should be prepared for a surprise breakout late in the day as traders decide on the close of the weekly chart.
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 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.