S&P Emini Pre-Open Market Analysis- The S&P 500 Emini sold off yesterday after getting two legs up to the moving average. The Bulls tried to get the upside breakout. However, they failed and gave up once the momentum stalled at the moving average.
- While the Bulls did a good job getting a bounce up from the 5,000-round number, the selloff down to the April low was strong enough for a second leg down.
- Yesterday was a strong enough breakout that the first reversal will probably fail.
- The bears are hopeful that today will create a strong follow-through bar, increasing the odds of a breakout below the April low.
- The Bulls want the Bears to be disappointed by the pullback from the April low. They are hopeful that there are enough disappointed bears interested in buying back shorts, which would cause the market to create a double bottom.
- Overall, the odds favor the Bears getting a disappointment bar today. However, traders must be prepared for the exact opposite and a strong follow-through bar.
What to Expect Today
- The Globex market has gone sideways for most of the overnight session.
- Yesterday’s bear selloff was climactic. There is a 75% chance of two hours of sideways trading beginning before the end of the second hour.
- There is a 50% chance of follow-through selling on the open and two hours of sideways trading beginning before the end of the second hour.
- There is only a 25% strong follow-through bar today.
- The FOMC report is at 2:00 PM EST today. The market may go sideways up until the report and create a strong breakout up or down when the report is released.
- Traders should stop trading at least 30 minutes before the report.
- FOMC reports often reverse after the initial 5-minute report bar. This means traders should wait to see the 2nd bar following the FOMC.
- The risk is also big during the FOMC. Traders should consider trading 20% of their normal position size.
- Overall, traders should assume that the open will have a lot of trading range price action leading up to the report at 2:00 PM EST.
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.