On Friday, E-mini broke to a new all-time high (an outside up week) and reached the 4,404 measured move target based on the April through June trading range. It also broke above the 4,400 Big Round Number. The next target for the bulls is the top of the channel, which is above the 4,500 Big Round Number. There is no sign of a top and traders will continue to buy 1- to 3-day selloffs, even if they are strong, like the one last week.
A reversal down from here would be from an expanding triangle top on the daily chart. That is a major trend reversal pattern. If there was a strong sell signal bar and a couple of big bear bars, the reversal would have a 40% chance of leading to a selloff for a couple weeks.
On the weekly chart, last week was an outside up week in a Small Pullback Bull Trend. That slightly increases the chance of at least slightly higher prices. However, a big bull bar late in a bull trend has an increased risk of leading to a bear bar on the following week.
On the monthly chart, July so far has seen the sixth consecutive bull bar. That has not happened in 10 years.
Since this is the final week of July, and while it is possible that there could be a reversal down to below the open of the month, especially since Wednesday’s FOMC announcement is a potential catalyst, it is more likely that July will be another bull bar. A 7th consecutive bull bar would be even more rare. Consequently, August should close below the open of the month.
Once there is a bear bar on the monthly chart, there would be a parabolic wedge top. Traders would then look for a 15-20% correction over the following 2 months.
E-Mini 5-Minute Chart And What To Expect Today
- E-mini is down 11 points in the overnight Globex session.
- While the 4-day rally was extremely strong on the 5-minute and 60-minute charts, it was probably unsustainably strong. That increases the chance of sideways to down trading, which could last up to Wednesday’s FOMC announcement or the end of the month on Friday.
- It also reduces the chance of a big bull day today.
- Friday was a buy climax day. Consequently, there is a 75% chance of at least a couple hours of sideways to down trading beginning by the end of the second hour.
Friday’s E-mini Setups
Here are several reasonable stop entry setups from Friday. 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.