E-Mini Becoming Climactic: Pullback Likely
2023.07.19 10:09
S&P Emini pre-open market analysis
Emini daily chart
- Yesterday’s bull breakout on the daily chart was climactic, increasing the odds of a pullback lasting a day or two.
- Typically, a bigger bull bar late in a breakout will attract profit-taking as traders see the bigger bar as a gift and a brief opportunity to take profits at an advantageous price.
- Climactic bars like yesterday typically lead to sideways trading and not a reversal. This means that the best the bears can expect is a brief pullback of the bull rally that began back on July 10th.
- The Emini is getting close to 4,600, and it may have to reach it. Today’s opening session may test 4,600 and form an opening reversal down, leading to a bear bar on the daily chart.
- The April 21st high (4,637.25) is close enough for the market to reach it before bears can take control. However, the market will probably have to get at least a brief pullback first.
- Overall, traders should expect a brief pullback lasting one to two bars soon. Traders will measure the strength of the pullback; if the bears appear weak, bulls will buy, leading to a second leg up.
Emini 5-minute chart and what to expect today
- Emini is up10 points in the overnight Globex session.
- The overnight Globex market has gone sideways in a tight trading range following yesterday’s strong bull rally.
- Since yesterday was so climactic, there is a 75% chance that the market will have two hours of sideways trading beginning before the end of the second hour.
- There is a 50% chance of follow-through buying on the open. If this happens, there is still a 75% chance of sideways trading beginning before the end of the second hour.
- The 4,600 big round number is not far away, and the market may have to reach it before the trading range begins.
- Traders should expect the bulls to probably be disappointed on the daily chart, which means today will likely be a bull trend or a trading range day.
- The open will probably have a lot of trading range price action. Generally, most traders should consider waiting 6-12 bars before placing a trade unless they are comfortable making quick decisions. This is especially true since there is a 75% chance of two hours of sideways trading today beginning before the end of the second hour.
- Lastly, traders should pay close attention to the open of the day as it will likely be an important price level.
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.
