S&P Emini Pre-Open Market Analysis
- The S&P 500 Emini sold off to the moving average last Friday and will likely find support at this price level. The bears continue to be unable to break below the moving average.
- Until the bears break below the daily moving average, traders will assume that any reversal down will be minor and lead to a trading range.
- The bears need to get more closes below the moving average at a minimum to demonstrate that they are gaining control.
- Ideally, the bears need bars completely below the moving average.
- Without closes below the moving average, bulls will continue to buy every test of the moving average.
- Overall, the daily chart is in a small pullback bull trend on the daily chart and the bulls are doing a great job holding above the moving average. Traders should assume that the odds favor more sideways to up until the bears get strong closes below the moving average.
What to Expect Today
- Emini is up 40 points in the overnight Globex session.
- The Globex market rallied during the early morning hours and recently formed a strong upside breakout.
- At the moment, the U.S. Session is going to gap up on the open.
- Bulls will expect a second leg up during the U.S. Session, following the gap up.
- The bulls want today to become a strong bull reversal bar, following the test of Friday’s daily moving average.
- While traders should expect a trading range open, they should also be prepared for a possible bull trend day.
- There is an 80% chance of a trading range open and only a 20% chance of a trend from the open.
- If today is going to be a trend day, a bull trend is more likely than a bear trend due to the gap up on the open.
- As I often say, most traders should consider not trading for the first 6 – 12 bars since most days usually form a trading range open.
- Most traders should try to catch the opening swing that often begins before the end of the second hour after forming a double top/bottom or a wedge top/bottom.
- More than 80% of days form an opening swing, beginning before the end of the second hour. The opening swing often doubles the opening range, lasts at least two hours, and has two legs. This usually provides a good risk/reward swing trade if one waits for a double top/bottom or a wedge top/bottom to form and enter on a stop.
- Overall, the most important rule when trading is to be open to any possibility. No matter what one thinks will happen, traders should assume there is at least a 40% chance they are wrong.
Friday’s Emini Setups
Here are reasonable stop-entry setups from Friday. I show each buy entry bar with a green arrow and each sell entry bar with a red arrow. 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 the 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.