- The S&P 500 E-mini formed a strong rally last week, breaking out above the June 28th tight trading range and the 5,600 round number. The odds favor a test back down to the 5,600 over the next couple of days.
- While last week formed strong buying pressure, which is a sign of strength by the bulls, it is another buy climax late in a rally. This increases the risk of the past three-day rally being a buy vacuum test of the 5,600 resistance.
- Because the market formed three consecutive bull bars in a strong bull trend, there will probably be buyers below the first reversal down.
- However, it the market forms a bear bar closing on its low, that will increase the risk of bulls getting trapped. This could lead to a test down to the bottom of the buy climax, the July low.
- Today will likely disappoint the bulls and not form another strong bull trend day. This means that traders should pay attention to last Friday’s high as it will likely be resistance today.
What to Expect Today
- The Globex market formed a tight bull channel for most of the overnight and early morning hours. This reduces the chances that the open of the U.S. Session will become a bull trend from the open.
- Traders should expect sideways trading on the open and the formation of a trading range. This means most traders should consider not trading for the first 6-12 bars unless they can make quick decisions.
Friday’s Emini Setups
Here are reasonable stop-entry setups from Friday. 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.