S&P 500 E-Mini Bears Hope for Second Leg Down
2023.08.28 10:10
Emini daily chart
- The formed a bad follow-through bar after last Thursday’s big outside down bar.
- The Bears are hopeful that last Friday is a pullback that will lead to a second leg down and a test of the August 18th low.
- The Bulls see last Friday as a double-bottom formation with August 18th. Next, the bulls want strong follow-through.
- The bulls will probably need two to three consecutive bull bars before traders will be convinced that the market is Always In Long.
- With last Friday, having a tail above the bar will increase the odds of sellers above the bar.
- It is reasonable for bears to exit above last Friday’s high. This increases the risk that today might be a decent entry bar for the bulls. However, as stated above, the tail above last Friday’s high lowers the probability for the bulls.
- Overall, the market is probably transitioning into a trading range. However, the selloff down to the August low is tight enough that sellers are probably above the August 24th high.
Emini 5-minute chart and what to expect today
- Emini is up 20 points in the overnight Globex session.
- The Globex market recently formed an upside breakout. The bulls hope this will lead to a rally during the U.S. Session.
- The bears hope the rally is a pullback from last Thursday’s outside down bar. The bears hope that a bear trend or trading range will develop on the open.
- Traders should be prepared for a trading range open. This means most traders should consider not trading for the first 6-12 bars of the session unless they are comfortable with limit order trading.
- Most traders should try and catch the swing trade that often develops on the open. It is common for a swing trade to begin before the end of the second hour after the market forms a double top/bottom or a wedge top/bottom.
- Lastly, traders should assume a trading range will develop until there is an apparent reason to expect a trend. If today is going to be a bull trend day, there will be plenty of time to enter the trend’s direction.
Friday’s Emini setups
SP500 Emini 5-Minute-Chart
Here are several reasonable stop-entry setups from Friday. 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.
