Pre-Open market analysis
There were strong bull days on Thursday and Friday last week. However, the Emini yesterday opened near Friday’s low and sold off to test the 2800 Big Round Number. A bear break below a reasonable buy setup typically has at least a small second leg down. Consequently, the Emini will probably trade lower over the next week or two. The next support is the March 25 low of 2789.50. Below that is the March 8 low of 2726.50. Finally, there is a gap above the February 8 high of 2686.25
The 2-week selloff has been in a tight bear channel. Once there is a reversal up on the daily chart, there will probably be a lower high. The selloff is strong enough for at least a small 2nd leg sideways to down after the first 3 – 5 day rally. Therefore, this selloff is probably a bear leg in what will become a trading range over the next couple of weeks.
Even if the selloff continues down to 2600 and retraces half of the 2019 rally, the odds are that the bulls will buy it. The bears need consecutive big bear bars to convince traders that this selloff is the start of a bear trend. Until then, the odds are that it is a pullback from the 2019 rally and there will be a rally to a new high.
3 – 5 day Bounce Soon
The midday reversal up yesterday was strong. This is a sign of aggressive bulls. If there is a rally on the open, yesterday’s late selloff could be a higher low major trend reversal.
Since the daily chart is getting oversold, a rally is likely soon. One target is Friday’s high. It was a strong bull bar and a buy setup on the daily chart. Many bulls who bought will buy lower, expect the Emini to get back to their original buy around Friday’s high. They will probably be right, even if the selloff continues down for a few more days first.
But, the 3-week selloff has been in a tight bear channel. When that is the case, the first reversal up usually forms a lower high. There is then a second leg sideways to down. That is still likely.
Overnight Emini Globex Trading
The Emini is up 16 points in the Globex session. There has been bad follow-through after bear bars on the daily chart all year, including during this 3-week selloff. Consequently, there is a slightly increased chance of a bull day today. This is true even though the selloff will probably test lower over the next couple of weeks.
Yesterday formed a Spike and Channel bear trend on the 5-minute chart. That usually evolves into a trading range. The midday rally was a bull leg in the range and the late selloff was a bear leg.
On the 5 minute chart, there is now a big double top and a higher low major trend reversal. That is also a head and shoulders bottom. The bulls, therefore, have a 40% chance of a bull trend today. Since the buying yesterday was strong and the daily chart is oversold, there is a reduced chance of a strong bear trend day today.
With strong legs up and down yesterday, day traders expect swing trades lasting at least a couple of hours today. In addition, there is an increased chance of a bull trend day today.
Yesterday’s 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. I rarely also show limit order entries and entries on the close of bars. Buyers of the Brooks Trading Course have access to a much more detailed explanation of the swing trades for each day.
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.