S&P Emini Pre-Open Market Analysis
- The S&P Emini sold off, closing below the October 6th low. This is a sign of strong selling and the trapped bull using any bounce to sell out of losing longs. This increases the probability that the first reveal up will fail.
- The bears hope that the recent downside momentum is strong enough to lead to a test down to the year’s open.
- There will likely be resistance near 4,178, which is the midpoint of the rally that began in October 2022.
- The bulls want the market to form a wedge bottom with August 18th and October 6th. If the bulls are going to get a reversal up, they will need to halt the selling pressure. They can create strong bull closes or make the market go sideways.
- The overall Emini is near the middle of the broad trading range on the weekly chart. This means the market can fall much lower before bulls begin to buy.
- Overall, traders will expect the bears to get another leg down after the past three big bear trend bars. Traders should wait and see what the second leg down looks like before buying. The bulls will try and prevent the bears from getting more follow-through selling today.
What to Expect Today
- Emini is down 15 points in the overnight Globex session.
- Traders should assume that today will have a lot of trading range price action on the open. In general, there is an 80% chance of a trading range open and only a 20% chance of a trend from the open.
- Because of the recent selling pressure on the daily chart, today will probably disappoint the bears and be either a weak bear bar or forming a bull bar.
- Traders should pay attention to the day’s open and last Friday’s low, as both will probably be important magnets.
- Most traders should try and catch the opening swing that often begins before the end of the second hour. It is typical for the opening swing to start after the formation of a double top/bottom or a wedge top/bottom. This means traders can often wait for one of the abovementioned patterns to develop before placing a trade.
- Lastly, traders must remember to be patient. If a setup does not look right, ignore it and wait for more clarity. There are 81 bars to the day, which is plenty of time for a trader to find a few reasonable trades.
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.