E-Mini Bulls Want A Rally To A New High Before Year's End

E-mini is down 5 points in the overnight Globex session.

Yesterday was a buy climax day. It ended with a potential expanding triangle over the final 2 hours, and as a result, there is a 75% chance of at least a couple hours of sideways to down trading today starting by the end of the second hour. With all of the abrupt reversals over the past month, traders should not be surprised if today is a big bear day, despite yesterday being a big bull day.

If today is a bear day, the daily chart will be in a triangle. That would take the chart back to around 50-50 (it is currently slightly more bullish). If the bulls are going to close the year at a new high, there probably will be mostly bull days for the remainder of the year. That means if the E-mini is below the open in the final hour, traders should be ready for a rally back above the open.

If the E-mini begins to form mostly bull days, that will increase the chance that the next day will be another bull day. The more bear days over the next few days, the less likely E-mini will make a new high this year.

h2 Yesterday's E-Mini Setups/h2

Yesterday was big bull day closing near its high. Monday was 1-day island bottom at the bottom of bull channel, just below the Sept. 2 high, and just above 100-day MA and Dec. 3 low. It was also a test of the 4500 Big Round Number.

Bulls are hoping this is the start of a rally that'll end with new high before year end. Bears hope this is a 2-day pullback in reversal down from double top (Nov. 22/Dec. 16). Bears want a reversal back down from 20-day EMA and a 50% pullback of selloff from the Dec. 16 high. If there is a reversal from a lower high, the trading range will be a triangle where Nov. 22 is the 1st high.

E-mini has been in a trading range for the past seven weeks, so we're in Breakout Mode, which means the probability of a successful bull breakout is about the same as that for a successful bear breakout.

I have been saying that odds slightly favor a bull breakout to a new high either in December or early 2022. However, if the bears get consecutive closes below the Dec. 3 low (neckline of double top), odds will shift in favor of a measured move down and test of the October low.

h2 E-Mini Chart/h2

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 much more detailed explanation of the swing trades for each day (see Online Course/BTC Daily Setups).

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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 E-mini.

 

Written By: Al Brooks