S&P Emini pre-open market analysis
Emini daily chart
- The S&P 500 Futures Yesterday formed a High 1 buy signal bar, closing on its high. The bulls are hopeful that today will lead to test of August high with a strong entry bar following yesterday’s High 1 buy signal bar.
- This is a credible stop-entry buy for the Bulls betting on a second leg up after last week’s two-bar bull breakout.
- The bears hope that the High 1 buy signal bar has more sellers above, trapping the bulls into buying high.
- Even if more sellers are above yesterday’s high, the selling will probably be temporary. Most bulls buying above yesterday’s buy signal bar will probably be willing to scale in lower.
- Traders will pay close attention to today’s follow-through to see how determined the bulls are.
- The bulls want today to close as a strong entry bar following yesterday’s buy signal. If they are successful, that could trap the bears into a bad short (selling above yesterday’s high) and lead to higher prices.
- The market is at the 4,300 Big Round Number, which will probably act as a magnet. This means the market may go sideways at this price level.
- The bull has two reasonable targets above. The 4,400 Big Round Number and the August 2022 high.
- It was reasonable for the bulls to buy during the August rally last year, and those bulls that did buy got trapped on the selloff down to the October low last year. It was reasonable for the bulls to buy, which means there is a 60% chance that the bulls can break even on their first entry, with a profit on the scale in entries.
- The bears need to develop more selling pressure to convince traders that the bears have one. At a minimum, the bears need to form a micro double top, and even then, that would likely not be enough.
Emini 5-minute chart and what to expect today
- Emini is up 3 points in the overnight Globex session.
- The overnight Globex market has had a lot of trading range price action.
- Traders should assume that the open will also have a lot of trading range price action.
- As I often say, most traders should consider not trading for the first 6-12 bars unless they are comfortable with limit order trading.
- Today has the potential to be a trend day. The bulls want strong follow-through buying after yesterday’s high 1 buy signal bar. The bears want a failed breakout above the High 1 buy signal bar.
- Traders should pay attention to the formation of the opening swing, which 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, that leads to the open swing.
- The opening swing is essential because it can provide a decent probability of more than twice your risk. Also, there is at least a 40% chance that the opening swing will double the size of the opening range, providing good risk-reward.
- Lastly, traders should be open to anything and always remember what Al says: “Price is Truth.” A trader must never be in denial of the price action.
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.