Pre-Open Market Analysis
The Emini reversed down on Monday and up yesterday. It closed just below Monday’s high and was almost an outside up day. Yesterday is therefore a buy signal bar for today. With it just below the all-time high, the Emini could gap up to a new high on the open.
It is important to note that there is an FOMC announcement at 11 am today. That is always a catalyst, and it will probably dominate the day. The Emini is unlikely to have a strong trend up or down ahead of the report.
It is better to think of the day starting over at 11 am. At that time, day traders should focus on what happens on the report and pay much less attention to the earlier bars. Reversals in the first 10 minutes after the report are the norm. Also, the bars are typically big and the market moves fast. Most traders should not resume trading until at least 10 minutes after the report.
Because the Emini is testing the all-time high, there is an increased chance of a big move up or down. This particularly true after the report. Big reversals are common at any point after an FOMC report. Consequently, day traders have to exit quickly if the Emini begins to reverse.
There is only a 20% chance of a strong, relentless trend after the report. If one forms, traders should look to enter on any one or two legged pullback.
Overnight Emini Globex Trading
The Emini is up 10 points in the Globex session. Today might therefore gap up to a new all-time high. A gap above key resistance increases the chance of a trend day. If there is a trend, up is slightly more likely.
There is a strong trend day from the open only 20% of the time. Most often, a big gap up leads to a trading range for the 1st hour. The bulls look for a double bottom or wedge bottom to around the EMA. However, the bears look for a double top or wedge top and then a swing down.
Day traders should go flat ahead of the 11 am PST FOMC announcement. There is usually a quick move in the wrong direction within the 1st few minutes. Consequently, it is usually better to not resume trading until at least 10 minutes after the report.
Furthermore, day traders should be open to anything. They have to be quick to determine if the Emini is in a trading range or a trend. In addition, they should be quick to exit their positions if the Emini reverses. This is because the reversals can be abrupt and go far.
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.