S&P Emini Pre-Open Market Analysis
Emini Daily Chart
- The S&P Emini went outside down yesterday after getting a strong downside breakout late in the session. This increases the odds of buyers below yesterday’s low.
- The Emini is getting near the March 8th breakout point high. This price level will probably act as support and lead to sideways trading for a day or two.
- The bears are hopeful that yesterday will have follow-through selling today. However, it is more likely that the bears will be disappointed today.
- Outside bars are expanding triangles on a smaller time frame. Trading range bars are very context-dependent.
- Because the market is Always In Long and near March 8th breakout point high, there are probably buyers below yesterday’s low.
- The bears need to get closes below the March 8th breakout point in order for trader to conclude that the daily chart is transitioning into a trading range.
- The daily chart has several open gaps since the channel began in January 2024.
- Open gaps indicate a small pullback bull trend and increase the risk of higher prices.
- Once the bears can get a breakout point to close, they will try to get a close below the most recent major higher low to end the argument of a bull trend.
- Overall, the bears have a long way to go before traders conclude they are in control. Small pullback trends are breakouts on higher time frames. This means the best the bears can expect is a trading range and not a bear trend on the daily chart.
What to Expect Today
- Emini is up 26 points in the overnight Globex session.
- The Globex market has been in a bull rally since yesterday’s late selloff during the U.S. Session.
- When you get a strong selloff, there are always option writing institutions who sell puts. These puts quickly begin to lose money, so these institutions short the underlying to reduce their loss on the puts.
- Once the loss on the puts is acceptable, institutions begin to buy back their positions, which reduces the selling pressure.
- In general, when you get a selloff late in the day, you must always consider the risk of traders buying after the selloff. This is due to option writing firms and because the market is in a bull trend on the higher time frames.
- The Emini will gap up on the open, increasing the odds of a second leg-up during the first 1-2 hours.
- Traders should expect a lot of trading range price action on the open. This means most traders should be patient on the open and consider not placing a trader for the first 6 – 12 bars.
- Most traders should focus on the open swing that often begins before the end of the second hour. It is typical for the opening swing to start after forming a double top/bottom or a wedge top/bottom. This means a trader can often wait for the market to form one of these above patterns before placing a trade.
- Traders should pay attention to the March 8th breakout point (5,256.5). Because the market is likely to gap up, it will probably not reach it. However, it is a reasonable magnet for the market to test over the next few days.
- Because yesterday was climactic, there is a 75% chance of a trading range beginning before the end of the second hour and lasting for two hours.
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.