Emini daily chart- The S&P 500 Futures gapped up and rallied yesterday following a bad Low 1 short on Tuesday.
- The bulls are hopeful that today will form another strong bull trend bar. However, it is more likely that today will disappoint the bulls.
- The channel down to the August low is tight. This increases the odds that the current reversal will be minor and not lead to a bear trend.
- The bulls have done enough damage to increase the odds of buyers not far below and more sideways trading.
- The bears who sold the August low are likely disappointed by the rally over the past four days. They will probably be more interested in minimizing a loss rather than making a profit. This increases the odds of a higher low above the August 18th low and at least a small second leg up.
- While the bulls have done a good job, the market is still Always In Short, which means the odds favor more sideways to down trading.
- However, the rally over the past few days increases the odds of the market being in a trading range which means there are probably buyers below the August 18th Low scaling in lower. This will limit the number of bears willing to establish new shorts below the August 18th low, assuming the market falls below it.
Emini 5-minute chart and what to expect today
- The overnight Globex market sold off during the early morning hours. However, after the strong rally yesterday, the odds favored a trading range and not a bear trend.
- The bears are trying to halt the buying pressure and convert the market into a trading range.
- The Bulls will try to get another follow-through bar today. However, the odds favor disappointment for the bulls.
- Traders should expect a trading range open and consider not trading for the first 6-12 bar unless they are comfortable with limit orders.
- By waiting for 6-12 bars, a trader will gain certainty on the day structure and have a higher probability of catching the high or low of the day.
- Most importantly, traders should be open to anything and not be in denial of what the price action is telling them.
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 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.