S&P 500 E-Mini Strong Bear Breakout With Follow-Through Likely

S&P Emini Pre-Open Market Analysis

• The S&P 500 Futures formed a strong bear breakout with follow-through on the daily chart, which broke below the August low and the 4,400 big round number.
• The recent bear breakout is strong enough to make the market Always Short and to get a second leg down likely.
• The risk is getting big for the bears, and the selloff is climactic, which means the market may have to go sideways for a few days to relieve the bears.
• The Bulls want the recent selloff to form a second-leg trap with the August low. At the moment, the odds favor the bears getting a second leg down.
• However, if the bulls can get a strong bull reversal bar or a series of bull bars closing near their highs, traders will begin to wonder if the selloff was a trap.
• While the bears have done an excellent job with the selling, and the odds favor lower prices over the next couple of weeks, the market will probably go sideways for the next day or two to relieve the bears.

What to Expect Today

• Emini is up 14 points in the overnight Globex session.
• The Globex market rallied for the past several hours overnight due to the bear selloff becoming climactic.
• With the past two days being strong bear trends, the odds are against another strong bear trend day. This means that today will probably have a lot of trading range price action for most of the day.
• Traders should pay attention to yesterday’s low and the day’s open, as both will likely be essential magnets during the U.S. Session.
• Traders should expect the open to have a lot of trading range price action. This means that most traders should consider not trading for the first 6 – 12 bars unless they are comfortable with limit order trading.
• Today is Friday, so weekly support and resistance are important.
• Traders should be prepared for a surprise breakout late in the day as traders decide to close the weekly chart.

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.