S&P Emini Pre-Open Market Analysis
- The S&P 500 Emini went outside up yesterday and closed on its high. The bulls hope they will get a second leg up after the June 5th bull breakout.
- The market will probably test 5,400 today or tomorrow. Yesterday, it closed with 20 points of the 5,400 magnet, and the market will likely be unable to avoid it.
- The bears do not mind a test of 5,400 as long as they can get a reversal back down. They will see the test of 5,400 as a failed breakout of the month-long trading range.
- The upside is likely limited, so the market will probably go sideways soon.
- The bears are hopeful that they will be able to get a reversal down and a test of the May 31st high. The bears will need to create more selling pressure before traders are convinced of what the bears are doing to get a strong reversal down.
- Traders will pay attention to see what kind of breakout the bulls will be able to get. The bulls need a strong close today, increasing the odds of higher prices. Even if they get a bull breakout above the June high, they will need a decent follow-through bar.
- Overall, traders expect the upside to be limited and the market to go sideways.
What to expect today
- Emini is up 45 points in the overnight Globex session.
- The Globex market recently formed an upside breakout during the CPI report released at 8:30 AM EST. The breakout bar is strong enough for a second leg up.
- The U.S. Session is likely going to gap up. This will increase the odds of the market going sideways and getting a second leg up during the first 1-2 hours of the Open.
- The bears will try for an endless pullback and reversal of the CPI breakout bar. However, a trading range is more likely than a bear trend today.
- Traders should expect a trading range open. This means they should consider not trading for the first 6-12 bars unless they can make quick decisions.
- Today is an FOMC day, which means traders must be mindful and ready for the release of the FOMC report.
- Most traders are better off not trading the report and treating today as a half day.
- If a trader decides to trade the FOMC report, they must trade small because the bars will likely be big. In general, traders should trade 20% of their normal position size.
- Traders should also wait at least 10 minutes before trading the FOMC. It is typical for the bar after the FOMC bar to reverse completely, so a trader is better off waiting to see what kind of follow-through the FOMC bar gets.
- Traders should assume that the FOMC release will lead to a trading range. However, they must be prepared for a strong breakout and trend.
- In general, traders should treat the FOMC as a new start to the day.
- The market may get neutral leading up to today’s FOMC report. This means that the first half of the day might have a lot of trading range price action.
- Traders should be flat at least 30 minutes before the release of the FOMC report. A trader planning on scaling into positions should consider getting flat an hour before the report.
- As always, traders should be patient on the open and wait for clarity.
- Traders should also consider trying to catch the opening swing that often begins before the end of the second hour after the formation of a double top/bottom or a wedge top/bottom.
Yesterday’s Emini Setups
Al created the S&P 500 Emini charts.
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 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.