S&P 500 Futures daily chart
- The Emini formed an outside bar yesterday within a tight trading range. Outside bars are generally trading range bars that force traders to buy or sell at the top and bottom of the range. This increases the odds of sellers above yesterday’s high and buyers below.
- The market bulls are hopeful that the channel on the daily chart will continue; however, it will likely begin to go sideways to down soon.
- The market has spent over 35 bars away from the moving average, which indicates strong buying. It is also a sign of climactic behavior.
- The moving average is a representation of a fair price. Bulls are happy to buy above it as long as the momentum justifies paying a premium to be long. However, once the momentum begins to stall and the market goes sideways, fewer bulls are willing to buy far away from the moving average. This is partly why the market is starting to go sideways.
- The bears need to develop more selling pressure to take control of the market. Until then, the best the bears can hope for is sideways trading and a test of the moving average.
- Overall, the market will probably test near 4,500 before the bulls can get up to 4,700.
Emini 5-minute chart and what to expect today
- Emini is up 35 points in the overnight Globex session.
- The Globex market has been in a small pullback bull trend on the 15-minute chart for most of the overnight session. This is due to yesterday’s FOMC bull breakout.
- The rally during the early morning session will likely limit the downside today. This means a bull trend or a trading range is more likely during the U.S. Session.
- The bulls are likely becoming exhausted due to the early morning rally. This means that a trading range open lasting a couple of hours is most likely.
- As I often say, most traders should consider waiting 6-12 bars before placing a trade. The open usually has many sideways trading and failed breakouts.
- The bars are often big on the open, and if one is not careful, they can take 2-3 significant losses and spend the rest of the day desperately trying to get back to breakeven.
- By waiting for 6-12 bars, one gains certainty on the day structure, giving them an edge.
- Traders should also focus on trying to catch the opening swing trade that often begins before the end of the second hour. It is common for the market to form a double top/bottom or a wedge top/bottom. This means a trader can often wait for one of the abovementioned patterns to form and enter on a strong entry for a swing lasting a couple of hours with at least a 40% chance of doubling the opening range.
- Lastly, traders should pay close attention to the day’s open as it will likely be an important magnet.
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.