S&P 500 E-Mini: Bulls Want Continued Buying After FOMC

S&P E-mini Pre-Open Market Analysis

• The S&P E-mini formed an upside breakout on the daily chart after yesterday’s FOMC release.
• The bulls see the three consecutive bull bars as being strong enough for a second leg up on the daily chart.
• Traders will pay close attention to today’s follow-through bar. The bulls are hopeful that the bulls will get another consecutive strong trend bar, which would increase the strength of the bull breakout.
• There are trapped bulls who bought the breakout that led to the October high and are currently trapped in a losing position. Those weighing the strength of the recent breakout and deciding what to do. Instead of getting out breakeven at their first entry or on the entire trade, those bulls may look to hold their positions for a second leg up and test the October high.
• There bears are hopeful that the current rally will form a lower high and lead to a new low. While this is possible, the odds favor two legs up and a test of the October high.
• The market formed a wedge bottom with an August 18th, October 3rd, and October 27th low. This was also a bear breakout below the bear trend channel line that can be drawn from the same days mentioned above.
• When the market forms a wedge, especially when it breaks below a bear trend channel line, it will often reverse up and test the top of the bear trend line at a minimum. Traders will also expect a second leg up after any reversal down.
• Overall, the reversal up on the daily chart is strong enough that traders will expect two legs up and a test of the October high.

What to Expect Today

• E-mini is up 40 points in the overnight Globex session.
• The E-mini formed a strong upside breakout during the early morning hours.
• The bulls want today to form a large gap up and close as a strong follow-through bar on the daily chart.
• The bears will try their best to disappoint the bulls during today’s session.
• As always traders should assume that today will have a lot of trading range price action on the open. This means that traders should consider not trading for the first 6-12 bars unless they can trade with limit orders and make quick decisions.
• Most traders should try and catch the opening swing that often begins before the end of the second hour, after the formation of a double top/bottom or a wedge top/bottom.
• Traders should be open to the possibility of follow-through buying on the open due to the gap up. However, the upside will probably be limited if there is a follow-through buying.

Yesterday’s E-mini Setups

Emini 5-Minute Chart

Here are reasonable stop-entry setups from yesterday. I show each buy entry bar with a green arrow and each sell entry bar with a red arrow. 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 E-mini.