S&P Emini Pre-Open Market Analysis
Emini Daily Chart
- The S&P 500 Emini went outside yesterday after testing below the April 4th bear breakout, which was likely to act as support.
- Wednesday’s Buy Signal bar was a small doji with a prominent tail above. This often indicates a potential market reversal, as the market may fall slightly and then reverse up, triggering the buy signal. This is exactly what happened today.
- While the bears have done a good job getting a bar completely below the moving average, the odds favor a trading range more than a bear trend.
- The bulls have had few opportunities to buy at the moving average since January. Now, they have a chance to buy below the moving average. This means that the downside is probably going to be limited.
- The bears likely need to create a more credible major trend reversal. This means that the market will likely need to go sideways for longer to develop more selling pressure.
- The daily chart is in a bull channel, meaning the odds favor the daily chart evolving into a trading range. The bears want to get down to the January low; however, they need more selling pressure, as mentioned above.
- If the bears can begin to create strong bear trend bars closing below the moving average, that will increase the odds of lower prices. Without it, the odds are the daily chart will continue to go sideways in the tight trading range.
What to Expect Today
- Emini is down 40 points in the overnight Globex session.
- The Globex market went sideways for most of the overnight session and broke to the downside during the early morning hours. This increases the odds of the market getting a gap down on the open.
- The bears tested near yesterday’s 10:30 AM EST bottom of the bull channel.
- Traders should assume that the open will have a lot of trading range price action. This means that most traders should wait for 6-21 bars unless they can trade with limit orders and make quick decisions.
- In general, there is a 50% chance that the initial breakout is in the wrong direction and the market will attempt to go the other way.
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.