E-Mini S&P 500: Minor Reversal Down

S&P Emini pre-open market analysis

Emini daily chart

• The S&P 500 Futures sold off yesterday, testing the July 17th high. While yesterday was good for the bulls, it is the first bear bar closing near its low following several strong bull bars. This increases the odds of a minor reversal down and buyers below.
• The bulls see the rally up to the July 19th high as strong. This means they are willing to buy high because they understand that if the market pulls back, they can buy more lower and exit around their original entry.
• The bears want a reversal down and a test of the June high. However, they will probably need more selling pressure to convince traders that the market is decreasing. Until then, bulls will continue to buy, betting on higher prices.
• Overall, the bears want today to form another bear trend bar. At a minimum, the bears want to prevent the bulls from getting a strong bull reversal bar following yesterday’s bear breakout bar.

Emini 5-minute chart and what to expect today

• Emini is up 23 points in the overnight Globex session.
• The Globex market recently formed a strong upside breakout of the bull channel. The rally is strong enough that the U.S. Session open will probably be in a bull trend or a trading range day.
• The bears are hopeful that the gap up on the open will be a trap. The bears will see it as a buy vacuum test of resistance and try to sell aggressively, turning the market down.
• Traders should expect a trading range open and the first 6-12 bars to form a trading range. This means that most traders should wait for at least 6 bars before placing a trade.
• The range often expands on the open and begins to contract going into the middle of the day. This means that traders need to monitor their risk. The bars on the open are often big, and it is easy to take a bigger loss than normal making it difficult to make up the loss before the end of the day.
• Traders should be prepared for the opening swing that often begins after the formation of a double top/bottom or a wedge top/bottom.
• Today is Friday, so weekly support and resistance is important. The market is above the midpoint of the week. The bulls want the need to close above the midpoint, so they can claim that they owned the week. Traders should pay close attention to the midpoint of the week as it will likely remain a magnet for most of the day.
• Lastly, since today is Friday, traders should be alert for a possible surprise breakout up or down in the final hours of the day as traders decide on the close of the weekly chart.

Yesterday’s Emini 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. Buyers of both the Brooks Trading Course and Encyclopedia of Chart Patterns have access to a near 4-year library of more detailed explanations of swing trade setups (see Online Course/BTC Daily Setups). Encyclopedia members get current daily charts added to Encyclopedia.

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 Emini.