S&P 500 E-Mini: Will the Strong Bear Breakout Continue?

S&P Emini Pre-Open Market Analysis

• The S&P 500 Futures closed below the prior day’s low last Friday, continuing the strong bear breakout. The bears see last week’s breakout as strong enough to make the market Always In Short. At a minimum, the Bears expect a 2nd leg down.
• The Bulls are hopeful that last week’s bear breakout will form a 2nd leg trap and reverse up. While this is possible, it is currently low probability. It will become a higher probability if the bulls begin to form more buying pressure in the form of bull bars closing near their highs.
• The bears will probably begin to take partial profits soon, which will cause the market to go sideways for a couple of days.
• Traders will pay close attention to the buying pressure over the next few days. If the market is unable to for solid bull bars, that will increase the odds of a second leg down and lower the probability of a 2nd leg trap.
• However, if the bulls can get a strong reversal bar with strong follow-through, more bars will exit, increasing the odds of a deep pullback.
• There are several breakout points not far below, such as the February 2nd high and the May 1st breakout point high.
• Since the daily chart is in a trading range, the odds favor the market falling below the breakout mentioned above points, allowing the scale in bears to make money.

What to Expect Today

• The Globex market formed a downside breakout during the early morning hours.
• The bears are hopeful that they will be able to get another follow-through bar on the daily chart.
• Because of how climactic the daily chart is with the downside breakout, the market may have difficulty closing below last Friday’s low.
• Today will probably have a lot of trading range price action on the open. Generally, there is an 80% chance of a trading range open and only a 20% chance of a trend from the open.
• Most traders should consider waiting 6-12 bars on the open before placing a trade.
• Most traders should try and catch the opening swing that often begins before the end of the second hour. It is typical for the opening swing to form a double top/bottom or a wedge top/bottom before the opening swing occurs. This provides excellent risk/reward, with decent probability for traders looking for a swing trade on the open.
• Lastly, traders should pay close attention to the open of the day and last Friday’s low. The bulls want a bull close on the daily chart to halt the selling. At a minimum, the bulls want to prevent the bears from closing below Last Friday’s low.

Friday’s Emini Setups

S&P 500 Emini 5-Minute-Chart

Here are several reasonable stop-entry setups from Friday. 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.