S&P Emini pre-open market analysis
Emini daily chart
- The S&P Emini gapped up and continued to rally, forming a doji bar on the daily chart. Trapped bulls who bought below May 22nd are likely to use the first reversal for a smaller loss.
- Bears did a good job of exerting selling pressure with the recent four-bar bear microchannel ending on May 24th, although the market selloff was limited to an overall trading range.
- This means that the market may find sellers close to yesterday’s close.
- Bears want a second leg down following the selloff that ended May 24th, but yesterday’s gap up lowers the probability for bears.
- The market is currently in a trading range that has lasted almost two months. This implies that the market is in breakout mode and that the directional probability is close to 50% for both bulls and bears.
- If either of them had a probability advantage, the market would not be going sideways in the middle of a large trading range.
Emini 5-minute chart and what to expect today
- The Emini rose by 11 points during the overnight Globex session.
- The CPI Report was released at 5:30 AM PT. So far, the report has had a two-bar selloff and a sharp reversal, which is typical trading range price action following a report.
- Traders should anticipate significant trading range price action during the U.S. Open.
- Most traders should wait for 6-12 bars. They should not be too aggressive on the open as the range can often contract after the market opens, making it hard for traders to recoup losses.
- The open typically probes support/resistance, and traders should expect the initial move on the open to have a 50% chance of a reversal and an 80% chance of a minor reversal.
- It is best to catch the opening swing that typically begins after the formation of a double top/bottom or a wedge top/bottom. This can provide excellent risk/reward for traders looking to enter on a stop-entry.
- Traders should pay attention to the day’s open, especially if the open is in the middle third of the range.
- Lastly, Friday is important for weekly chart support/resistance. It is common to see a surprise breakout late in the day as traders decide on the weekly chart’s close. Thus market breakout surprises should not be taken lightly.
Yesterday’s Emini setups
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 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.
