S&P Emini Pre-Open Market Analysis
- The S&P 500 Futures sold off yesterday, testing near the 200–day moving average and the 4,300 big round number.
- Both of the prices mentioned above levels will probably act as support and limit the downside over the next couple of days.
- The selloff on the daily chart is climactic, and the odds favor a pullback lasting a couple of bars over the next few days.
- Right now the daily chart is forming a follow-through bar closing near its low. Since today is Wednesday, the halfway point in the week, traders should be open to the possibility of a reversal up and a test of the open of the week.
- The bulls still expect a test of the August 18th low to allow the trapped bulls who bought this low and scaled in lower.
- The bears want the August 18th low to become a successful measuring gap leading to a measured move down from the September 1st high to the August 18th low.
- While the bears may get their measured move down, more likely the market will reach the August 18th low, before the bear gets their measured move down.
What to Expect Today
- Emini is up 15 points in the overnight Globex session.
- The 60-minute Globex chart has been in a tight bull channel since yesterday’s close. The bulls are hopeful that the overnight/morning rally is the first leg and the U.S. session will form a second leg and test yesterday’s high.
- The odds favor today closing above today’s open and forming a bull bar on the daily chart.
- There is an 80% chance of a trading range open and only a 20% chance of a trend from the open. This means that most traders will be better off expecting a trading range on the open and being more cautious.
- It is common to get surprise breakouts on the open that trap traders into entering a breakout with a lower probability of success than one thing.
- Generally, everything is closer to 50% on the open. This means lower probability events have a greater risk of happening, and higher probability events have a slightly lower probability.
- This means that most traders should try and catch the opening swing that often begins after the formation of a double top/bottom or a wedge bottom/top.
- Waiting for one of the stops mentioned above entries to form often provides traders with a great risk/reward trade.
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.