S&P Emini Pre-Open Market Analysis- The S&P 500 E-Mini formed an upside breakout last week, following a two-week triangle. The bears were able to form a reversal bar, followed by a bear entry bar on Friday. The Bears are hopeful that today will be another bear follow-through bar, closing on its low, which would be a give-up bar.
- If the bear can get another bear bar today, especially if it is a decent size, that would increase the odds of a second leg down.
- The bears are hopeful that the recent upside breakout will lead to a final flag and a reversal down to the March 19th low.
- Next, the bears will want closes below the moving average as a sign that they are gaining strength.
- The breakout last week is a surprise, which increases the odds of at least a small second leg. Even if the rally gets a second leg up, there is an increased risk of the rally being exhaustive. This increases the odds of a trading range and the market reaching the moving average.
- The bears need to start closing breakout points, which are open gaps in the small pullback bull trend. Open gaps are a sign of trapped traders, which increases the odds of trend continuation and higher prices.
- Overall, the bears need to create strong closes below the moving average before traders are convinced that the bears have a chance of owning the market.
- Even if the bears manage to get two to three closes below the moving average, the odds will favor a trading range more than a bear trend.
What to Expect Today
- E-Mini is down 17 points in the overnight Globex session.
- The Globex market has continued to channel down since yesterday’s Globex open.
- The bears are hopeful that today will open with a large gap down, increasing the odds of a bear trend during the U.S. Session.
- Traders should expect a lot of trading range price action on the open. This means traders should consider waiting for 6-12 bars before trading.
- There is an 80% chance of a trading range open and only a 20% chance of a trend from the open up or down.
- Traders should consider trying to catch the opening swing that often begins before the end of the second hour. The opening swing often lasts two hours and two legs, making it a great risk/reward opportunity.
- Traders should pay attention to Friday’s low as it will likely be an important magnet as bears try to get continued selling on the daily chart.
- The most important thing on the open is to be patient. There is plenty of time to place a trade, and the open often has several reversals. This means that failed breakouts on the open are common, which means traders must be cautious.
Friday’s Emini Setup
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.