E-mini pre-open market analysis
E-mini daily chart
E-mini hit a new high yesterday, but closed below the old high from Friday. It's formed a bear body, but at least it's a small one, so there's low probability a sell signal bar for the micro double top with Friday’s high will appear.
E-mini bulls want to test channel top at 4460.
Yesterday was a second consecutive small doji bar after Thursday’s small breakout above the 10-day tight trading range. While this is weak follow-through after a small breakout, the absence of a reversal down makes for at least slightly higher prices likely.
Bulls want the rally to break above the top of the bull channel, which is currently around 4,460. However, a breakout above a bull channel has a 75% chance of starting to reverse within about 5 days. Consequently, as strong as the year long rally has been, there should be some profit taking soon. It could come from below the top of the channel. The upside is probably small over the next month.
The monthly chart currently has 7 consecutive bull bars. That has only happened twice in the 25-year history of the E-mini. Furthermore, there has never been eight. Therefore, August or September should be a bear bar. That increases the chance of a reversal down at any point. However, the best the bears can probably get is a 15 to 20% correction over a few months. The bulls will buy the first reversal down in a strong bull trend, even if that reversal is big.
E-mini 5-minute chart and what to expect today
E-mini is up 10+ points in the overnight Globex session. It rallied sharply earlier on the CPI report. Today could gap up to another new high.
While markets have inertia and tend to continue what they have been doing, 3 small sideways days is unusual. That increases the chance of a breakout in either direction today or soon.
It is important to understand that a strong breakout increases the chance of a trend day, but breakouts often fail and reverse.
Yesterday’s E-mini 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 much more detailed explanation of the swing trades for each day (see Online Course/BTC Daily Setups). 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 E-mini.