S&P 500 E-Mini: Pullback Likely Over Next Few Weeks

Emini daily chart

• The S&P 500 Futures will likely pull back to the moving average over the next couple of weeks.
• The momentum is beginning to stall and the risk is getting big for the bulls.
• Since the market is in an overall trading range, the pullback could be deep and test down to the October 17^th high.
• Even if the market reaches the October 17 high, the odds will still favor the market reaching the September 1^st high, which is the top of the bear channel.
• The market can go sideways for several bars, dragging the moving average up to the current price level.
• The bears want the market to form a double-top bear flag with the September 1^st high. Next, they want a strong downside breakout and test of the October 27^th low. However, even if the market reaches the October 27^th low, the odds will favor buyers below.
• The bears need to begin to form bear bars, closing on their lows. This will increase the probability that bulls will begin to take partial profits, leading to a couple of legs sideways to down.
• Overall, the odds favor sideways trading over the next several months. Because the market is far away from the moving average, traders will likely hesitate to buy until the market gets closer to the moving average.
  
  

Emini 5-minute chart and what to expect today

• Because the daily chart is likely to get a pullback, there is an added risk that today will form a bear close on the daily chart.
• Traders will pay close attention to the open of the day.
• Today will probably have a lot of trading range price action on the open. This means most traders should wait for 6 – 12 bars before placing a trade unless they are comfortable with limit order trading.
• Most traders should wait for the opening swing that often begins before the end of the second hour after forming a double top/bottom or a wedge top/bottom.
• Traders should assume today will be a trading range day until there is a strong enough breakout with follow-through to make them think that a possible trend is underway.
• The market has been sideways in a tight trading range for the past couple of days. This increases the risk of a strong breakout and measured move of the recent trading range. If the market begins to form a strong breakout, closing beyond many bars to the left, traders must not be in denial of the breakout underway.
  
  

Yesterday’s Emini setups

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 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.