The E-mini gapped up yesterday, creating a 4-day island bottom. But the day closed in its middle, like the 3 prior days. This makes the reversal up a little less bullish. However, a reversal up from a sell climax typically has at least a couple legs of sideways to up trading. Traders therefore expect at least slightly higher prices over the next week. This is true regardless of the outcome of the election.
The E-mini has been oscillating around the February high for 3 months. Yesterday broke above it but closed below it. Today will probably gap up above it.
The E-mini was sideways for 5 days in late October at around 3450. That is therefore an area of agreement. The 3-day reversal up is probably strong enough to get there again within a few days.
Even though the E-mini has been in a trading range for 3 months, there are also several factors that increase the chance of a surprisingly big move up or down at any time. The E-mini is reversing up from a parabolic wedge sell climax at support on the daily chart. That is bullish. But there is an ioi sell signal on the monthly chart. Also, there is an FOMC meeting tomorrow. And then this is an unusual election, and there will be ugly lawsuits in many states. This will likely end up in the Supreme Court.
Traders need to be open to anything this week. But even if today has a lot of trading range trading, the range will probably be big enough for swing trading.
Overnight E-mini Globex trading
The E-mini is up 53 points in the Globex session. There will probably be a big gap up today. When there is a big gap, the E-mini is far above the EMA, which is the average price. Bulls do not want to pay far above average unless they are buying very strong bull bars. The bears will sell a strong reversal down. There is only a 20% chance of a strong trend up or down on the open that will last all day.
If today is a trend day, up is more likely. Also, it will probably be a weaker type of trend, which means it will probably have at least a couple hours of trading range trading at some point.
What is most likely on the open? A big gap usually leads to a trading range for the first couple hours. The bears want to sell a double top or a wedge rally. The bulls want to buy closer to the EMA. They will look for a double bottom or a wedge bottom near the EMA.
It is important to note that yesterday’s early rally on the 5-minute chart was a Dominant Bull Surprise Breakout. That usually leads to follow-through buying for at least a few days. Consequently, traders will look to buy selloffs today. The E-mini should work higher.
Overnight trading was extremely volatile. There was a big rally, a selloff to a new low, and then a rally back up to the overnight high. That confusion is a sign of balance. It increases the chance of trading range trading. Since a big gap up usually leads to a couple hours of trading range trading, today will likely begin with a trading range.
With big bars and big legs overnight, even if today is a trading range day, day traders expect at least one swing trade.
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. I do not want the lines to be distracting. If they are longer, I make them dotted. But, they have to be visible, so I make the shorter ones solid. 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.
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.