Pre-Open market analysis
Yesterday rallied in a Small Pullback Bull Trend. In addition, Monday was a big bear day and yesterday opened near Monday’s high. This is a buy signal, similar to January 4. However, the bars are small and have prominent tails. Furthermore, the 3-week bear channel is tight. This is a weak buy setup.
Will this lead to a huge rally, like in January? No. The context is different and the bars are weaker. That was after a crash down to the 10-year bull trend line. This is a 3-week bull flag late in a bull trend and the Emini probably has been in a trading range since early March.
The bulls will need a double bottom before they can get a new all-time high. Consequently, if the Eminirallies for 3 – 5 days, it will probably form a lower high around Friday’s high.
However, the odds still favor a new all-time high this summer. This is true even if the pullback continues down to close the gap above the February 8 high at 2686.25.
Bear channel will probably evolve into small trading range soon
There have been 6 legs down in the bear channel on the 60-minute chart since May 1 high. That is unusual. Unusual means unsustainable. Therefore, traders expect a change in the price action soon.
When there is a bear channel, there is only a 25% chance of a bear breakout and an acceleration down. More often, there is a break above the bear trend line and then a transition into a trading range.
This will probably happen over the next week. Consequently, the bulls will look for a reversal up from around Monday’s low. However, if there are a series of big bear bars closing below that low, traders will look for a 150 point measured move down.
Overnight Emini Globex trading
The Emini is down 20 points in the Globex session. The bulls hope that the 2-day rally will form a higher low today and they then want the Emini to rally for several days.
The bears will continue to sell rallies, betting on a continuation of the 3-week bear channel. In addition, if they can get a strong break below Monday’s low, they might make the bulls give up. If they give up, there can be a big bear trend day.
Today will probably be like most days over the past month and have at least one swing up and down. Also, because the 2-day rally was big, the Emini will probably begin to form a trading range on the 60-minute chart.
Therefore, after a big gap down today, the bulls will look for a reversal up within the 1st couple of hours. Less likely, the big gap down will be the start of a big bear trend day.
When there is a big gap up or down, there is an 80% chance of a trading range for the first hour. Then, the bulls look for a double bottom or wedge bottom for an early low of the day. The bears want a double top or wedge bear flag near the EMA and then a swing down.
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. Buyers of the Brooks Trading Course have access to a much more detailed explanation of the swing trades for each day.
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.