Pre-Open market analysis
The Emini continued its 3 day trading range yesterday. But, it closed near its low and it was the 2nd consecutive bear inside bar. This is an ii sell signal for today.
The market is near last year’s close and that was a magnet for the 1st 6 months. Therefore, there will probably be at least a small 2nd leg down to test that level. Today might be the start of that test.
What follows the test will be important. It will tell us if last week’s selloff was a spike in a spike and channel bear trend, or simply a sharp pullback to support. Will the Emini test the February low or the September high?
We should find out within a couple of weeks. If there is a selloff that reverses up from last year’s low, the odds will favor a new all-time high or at least a retracement of half of last week’s selloff. Alternatively, if the selloff just keeps dropping, then the Emini might test the February low.
Overnight Emini Globex trading
The Emini is up 17 points in the Globex market. While yesterday closed on its low and is a good sell signal bar, traders still do not know if last week’s selloff was a bear trap. They therefore are willing to buy a strong breakout above a 2 day bear flag.
The past 3 days have been sideways. This is a breakout mode pattern. Day traders will continue to look for reversals, even knowing that a breakout is likely within a few days. Until there is a breakout, there is no breakout.
Because the daily range is still big, the legs up and down have been swing trades. Today will probably be similar to the past few days and have several swings up and down.
Since the past 4 days have been bear days on the daily chart, if today trades above yesterday’s high, traders will expect the breakout to fail. They will therefore look for a reversal down. However, experienced traders know that the 4 day selloff might be a bear trap. Consequently, they will not hesitate to swing trade their longs if there is a strong rally.
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. 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.