Emini daily chart
- o The S&P 500 Futures rallied yesterday, creating follow-through buying after last Friday’s upside breakout. The Bulls are hopeful that they will get at least a small second leg up.
- o The bulls are hopeful that yesterday’s follow-through is strong enough to increase the odds of a second leg up.
- o The bears will see the past two trading days as an exhaustive buy climax. The bears will try to create a strong bear reversal bar.
- o The market is still Always In Long and the odds favor higher prices. However, as I have been saying for some time, the market is far from the moving average. This increases the odds of the market testing down to the moving average soon.
- o The market is dragging the moving average up to the current price level. This means that the market can reach the moving average by going sideways.
- o It is possible that the Emini will reach the July high before testing the moving average.
- o Traders will pay close attention to today, to see if the bears can form a strong bear reversal bar, following bulls the bar bull breakout. Because the market is in a tight bull channel, the bears the bears can hope for is sideways until they form more selling pressure.
Emini 5-minute chart and what to expect today
- o Emini is down 4 points in the overnight Globex session.
- o The bears formed a downside breakout during the 8:30 AM PT report.
- o The bears are hopeful that this will be the start of a bear trend day, which would disappoint the bulls on the daily chart.
- o Traders should anticipate the market having a lot of trading range price action on the open. Most traders should consider not trading during the first 6-12 bars unless they are comfortable using wide stops and trading with limit orders.
- o It is common for breakouts to fail on the open and reverse. This makes it easy to take a big loss on the open, making it challenging to recover before the end of the day.
- o There is an 80% chance of a trading range open and only a 20% chance of a trend from the open. This means that 80% of the time, there is no rush to enter the market on the open.
- o Traders should try to catch the opening swing that often begins before the end of the second hour, after the formation of a double top/bottom or a wedge top/bottom.
Yesterday’s Emini setups
Here are reasonable stop entry setups from yesterday. 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.