S&P Emini pre-open market analysis
- The S&P Emini is forming a tight trading range at 4,400 the big round number. This is a breakout mode pattern on the daily chart.
- If the probability was high for either the bulls or the bears, the market would not be going sideways.
- The Bulls formed a recent upside breakout last week. It is essential to realize that a bull breakout in a trend and a bull breakout in a trading range are not the same thing. A bull trend implies higher prices, and the rally will likely last a long time. This means a trader can buy anywhere, use a wide stop, and have a high probability of making money.
- A bull breakout within a trading range has a higher risk of a deep pullback before the second leg up, and a possible reversal in the opposite direction.
- Here, the market is forming a bull breakout in a trading range on the daily chart. While the odds favor a second leg up, every bar added to the current tight trading range lowers the probability for the bulls.
- The market is right at the 4,400 big round number, which is a magnet, and part of the reason the market is going sideways.
- The odds favor higher prices, a second leg up, and a test of the 4,450 to the 4,500 big round number. If the bears start to get two or three bear bars closing on their lows, the probability will decrease for the bulls and increase for the bears getting a test of the October low.
What to Expect Today
- Emini is down 20 points in the overnight Globex session.
- The overnight Globex market has gone sideways to down, following yesterday’s midday reversal.
- The bears are hopeful that today will start a downside breakout of the tight trading range. More likely, any downside breakout will find buyers below.
- There are probably buyers below yesterday’s low if the market reaches it. Traders should be aware of a possible gap down, followed by an opening reversal to the upside.
- As always, there is an 80% chance of a trading range open and only a 20% chance of a trend from the open up or down.
- Most traders should wait for 6-12 bars, before placing a trade unless they are quick to make decisions and trade with limit orders.
- It is common for the opening swing to begin before the end of the second hour after forming a double top/bottom or a wedge top/bottom. This means a trader can wait for one of the abovementioned patterns before looking to place a trade.
Yesterday’s Emini Setups
Here are reasonable stop-entry setups from yesterday. I show each buy entry with a green arrow and each sell entry 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.