S&P Emini Pre-Open Market Analysis- The S&P Emini formed a strong downside breakout yesterday and closed below the daily moving average.
- Yesterday’s downside breakout is a big enough surprise that the odds favor a second leg down.
- Traders will pay close attention to what kind of follow-through selling the bears will get.
- While the Bears have done a great job getting below the moving average, it is the first close below the moving average since January. This reduces the odds of the market getting a strong downside breakout on the daily chart.
- Because yesterday’s breakout was a surprise, bulls will likely be cautious about buying the first reversal up. This increases the odds that the first reversal up will be brief, and the bears will get an attempt at a second leg down.
- Overall, yesterday, the odds increased that the daily chart is transitioning from a tight bull channel into a trading range.
What to Expect Today
- Emini is up 15 points in the overnight Globex session.
- The Emini has been in a tight bull channel for most of the overnight Globex hours.
- Traders should expect today to have a lot of trading range price action on the open.
- Yesterday was climactic, which means there is a 75% chance of a trading range lasting for two hours beginning before the end of the second hour.
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.