S&P Emini pre-open market analysis
- The S&P 500 Futures gapped down yesterday and rallied above yesterday’s low.
- The bears have done a good job forming a 4-bar bear microchannel. However, the market will probably pull back soon and may rally above yesterday’s high today.
- The bear breakout over the past four days is probably strong enough to get a second leg down after any reversal up.
- The current price is near the middle of a trading range that has gone on for several months. This increases the odds that the bears will become disappointed by the follow-through selling. If bears become concerned with selling in the middle of a trading range, the market may form a deep pullback.
- The bears got trapped selling above the August 25th buy signal bar. The high of this bar will likely act as support due to trapped bears buying back shorts. The bulls know the bears are trapped and they will buy as well.
- Overall, the daily chart will probably bounce, and it may have to reach the August 25th high first, before the bulls can get a brief rally. The market does not have to go higher though and can quickly get a test down to the August low; however, sideways is more likely.
What to Expect Today
- The overnight Globex market has gone sideways within yesterday’s range.
- The bull recently formed a possible higher low major trend reversal around 8:00 ET.
- The bulls are hopeful the major trend reversal will lead to a strong rally above yesterday’s high during the U.S. Session.
- There is an 80% chance of a trading range open, which means the odds favor the market, forming a double top and bottom before a swing trade.
- Most traders should wait 6-12 bars before placing a trade unless they are comfortable making quick decisions and trading failed breakouts.
- Most traders should wait for a double top/bottom or a wedge top/bottom to set up a credible swing trade.
- There is a swing that often begins before the end of the second hour after forming one of the abovementioned patterns.
- This swing often has a 40% chance of getting a measured move of the opening range, which provides excellent risk/reward for a swing trader.
- Today is Friday, so weekly support and resistance are important. The bears want the weekly chart to close on its low, and the bulls want the weekly bar to have as big of a tail as possible below it.
- Lastly, traders should pay attention to the day’s open and yesterday’s low/high. Traders should be prepared for a possible rally and test of yesterday’s high.
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 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.