Emini daily chart
- The S&P 500 Futures sold off yesterday after testing the August 11th breakout point low.
- The selloff to the August 18th low was strong enough for a second leg down. However, it was reasonable for the market to test the August 11th breakout point low first before the Bears got a second leg down.
- There were disappointed bulls who bought the August 11th low and scaled in lower. Those bulls likely used yesterday’s retest of the August low to sell out of longs.
- Traders saw yesterday’s open as a two-legged pullback in a tight bear channel.
- It was reasonable for the bulls who bought above the August 18th high to hold long below the first pullback (August 22nd Low 1). However, they would likely be quick to exit during the 2nd reversal down, which was yesterday.
- The bulls have a four-bar bull micro channel. This will lower the probability of the bears selling at the close of yesterday’s bar. However, yesterday was a big enough surprise that it will likely have at least a small 2nd leg down.
- The bears are hopeful that today will be a strong follow-through bar, following yesterday’s outside down bar. The bulls want the opposite and for today to form a bull reversal bar closing on its high. Outside bars are generally trading range bars, which increases the odds that today will disappoint the bears.
Emini 5-minute chart and what to expect today
- Emini is up 15 points in the overnight Globex session.
- The Globex market rallied for a couple of legs during the overnight session. However, the rally is probably a leg in a trading range.
- The bears are hopeful they will get follow-through selling today. More likely today will have a lot of trading range price action.
- Because of yesterday’s consecutive sell climaxes, there is a 75% chance of two hours of sideways trading beginning before the end of the second hour.
- There is a 50% chance of follow-through selling on the open, followed by two hours of sideways trading beginning before the end of the second hour.
- Lastly, there is only a 25% chance of a strong trend day up or down.
- Since today is Friday, the weekly chart is essential. Traders should be ready for a possible surprise breakout last in the day as traders decide to close 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.