S&P 500 E-Mini Bears Want 4,400 Test

S&P Emini Pre-Open Market Analysis

• The S&P 500 Futures triggered the buy above Tuesday’s weak buy signal bar and reversed down sharply.
• Yesterday’s outside down bar is enough for traders to conclude that the market will probably test closer to the August low and the 4,400 Big Round Number.
• The bears want yesterday’s outside down bar to lead to a trap, enticing bears to sell low in a trading range. More likely, yesterday’s outside down bar is strong enough to lead to at least a small second leg down.
• Yesterday’s breakout is large and climactic. This will increase the odds that the market will have bad follow-through lasting 1-3 bars, followed by a second leg down.
• Overall, traders will pay close attention to what kind of follow-through selling the bears will get today. Since the market is in a trading range on the daily chart, traders expect tomorrow to have a disappointing follow-through.

What to Expect Today

• The Globex market has continued to go lower during the overnight hours.
• The bears want the open of the U.S. session to gap down and form another bear trend day.
• The bulls want the opposite and for today to have weak follow-through.
• Yesterday’s selloff late in the day was climactic, which means 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 and a 75% chance of sideways trading beginning before the end of the second hour.
• There is only a 25% chance of another strong bear trend day.
• Traders should pay attention to the day’s open and yesterday’s low, as both will probably be magnets today.
• Traders should consider not trading the first 6-12 bars unless they are comfortable with limit order trading.

Yesterday’s Emini setups

S&P 500 Emini-5-Minute Chart

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 the 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.