S&P Emini Pre-Open Market Analysis- The S&P 500 Emini formed five consecutive bear bars below the moving average. This is a sign of strong selling and increases the odds of lower prices and a test of the 5,000 round number.
- The market will likely test down to the 5,000 big round number (which it did during the Globex Session).
- The 5,000 round number is such an important price level that the market will have a hard time escaping the gravitational pull of it.
- There will probably be profit-taking at the 5,000 round number, and the market will likely bounce for a few days, as the round number will likely act as support.
- The bears want to get down to the January 5th low, the bottom of the bull channel.
- The daily chart is now in a trading range and is near the midpoint of the bull channel. This increases the risk that the bears selling at this price level could suffer a deep pullback before they get a second leg down.
- The bulls are hopeful that the current selloff will lead to a major high lower and a reversal up to the All time high. More likely, the Bears are going to get a second leg down.
- Overall, traders should expect the market to go sideways, and the downside will likely be limited for the next day or two.
What to Expect Today
- Emini is down 6 points in the overnight Globex session.
- The Globex Market sold off to the 5,000 big round number late last night and found support.
- Traders have been expecting a test of 5,000, and the odds favored reaching it soon.
- The news will argue that last night’s selloff was due to Israel’s retaliation attack on Iran and fears of a Global War. While the recent bombings could be the catalyst for the selloff, the reality is that traders expected a pullback and were not willing to buy until the market reached the magnet of 5,000. If there are not enough traders willing to buy, the market will quickly race down to a price level where bulls will be willing to buy again, which in this case is 5,000.
- Because the reversal up from 5,000 is strong, traders will expect the downside today to be limited.
- This will reduce the odds of today becoming a bear trend day and increase the chances of a bull trend or a trading range day.
- As always, traders should expect the open to have a lot of sideways trading. Most traders should consider not trading for the first 6-12 bars unless they can make quick decisions since most breakouts fail.
- The most important thing on the open is to be patient and not in a rush to do anything. By waiting on the open, a trader gains certainty above the outcome of the day.
- Today is Friday, so the weekly chart is important. Traders should be prepared for a surprise breakout late in the day as traders decide on the close of the weekly chart.
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.
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.