S&P Emini pre-open market analysis
- The S&P Emini formed another strong bull breakout bar on the daily chart. While the breakout is strong on the daily chart, it is becoming climactic. This will increase the odds of a pullback lasting 1-3 days.
- The market is Always Long and will probably test the October high, even if there is a brief pullback first.
- The bears hope this rally will be similar to the rally up to October 11th. Next, the bears will want the market to scall and reverse down to below the October low.
- The market formed a wedge bottom with an August 18th, October 3rd, and October 27th low. Wedge bottoms typically lead to two legs in the opposite direction lasting about half as many bars as the wedge. This means that the odds favor the Bulls getting a second leg up.
- The bulls are hopeful that the recent upside breakout will get a measured move up and a test of the August 31st low, which is the start of the bear channel that began on the daily chart.
What to Expect Today
- Emini is up 21 points in the overnight Globex session.
- The Emimi was in a tight trading range for most of the overnight Globex session.
- The Bulls recently formed an upside breakout during the 8:30 EST report that was released.
- While the breakout is strong, the odds favor the bulls becoming disappointed. This means today will probably be a trading range day and not another intense bull trend day.
- Traders should expect the open to have a lot of trading range price action. This means that most traders should consider not trading during the first 6-12 bars unless they are comfortable with limit order trading and can make quick decisions.
- Most traders should look for the opening swing that often begins before the end of the second hour after forming a double top/bottom or a wedge top/bottom.
- Today is Friday, so weekly support and resistance are essential. The bulls want the week to close on its high, and the bears want to create as big of a tail as possible on the weekly chart.
- It is common for Fridays to get a surprise breakout late in the day as institutions decide on the closing price of the weekly chart. If the market does form a surprise breakout late in the day, traders must not be in denial.
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.