S&P Emini Pre-Open Market Analysis
- The S&P Emini is stalling at the October 6th low. The bulls are trying to create enough buying pressure to force the bears to give up on the idea of another leg down.
- The bears believe the recent three-bar breakout is strong enough for a second leg down.
- The odds favor a second leg down and a test of the 4,200 and the midpoint (4,172) of the rally that began in October 2022.
- It is that the market is forming a wedge bottom with August 18th, October 6th, and the final leg down being the current leg down.
- The bulls who bought the rally up from the October 6th low are trapped in a losing trade due to the recent selloff. Some of those bulls are still long, deciding what to do. At the moment, the odds favor those bulls selling out of longs on any bounce and the market getting a second leg down.
- However, if the market goes sideways and develops more bull bars, closing on their high, the bulls may hold onto the longs for a test of the October high.
- Lastly, yesterday formed a Low 1 sell signal. However, it is a bull bar at support, which increases the probability of buyers below and sideways trading for a day or two. This means traders should pay attention to yesterday’s low as it will probably be a magnet.
What to Expect Today
- Emini is down 15 points in the overnight Globex session.
- The Globex market has been in a tight trading range for the past several hours. This means the market is in breakout mode going into this morning’s open.
- Traders should be cautious about trading the first 6-12 bars as it often has several reversals. Most traders will be better off if they avoid trading during this time unless they are quick to make decisions.
- There is an 80% chance of a trading range open and only a 20% chance of a trend from the open.
- Yesterday formed a Low 1 on the daily chart. This means that yesterday’s low is a magnet and will probably act as support if the market gets down to it.
- There is at least an 80% chance of an opening swing that will often begin before the end of the second hour. Most traders should focus on catching the opening because of the excellent risk reward it often provides.
- It is common for the market to form a double top/bottom or a wedge top/bottom before the opening swing begins. This is because the market often forms a trading range open, and thus, one of the patterns mentioned above will often develop before there is a breakout.
- Traders should expect today to have a lot of trading range price action and disappoint both the bulls and the bears.
Yesterday’s Emini Setups
Here are reasonable stop-entry setups from yesterday. 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.