S&P 500 E-Mini Bears Want Test of July 27 Low
2023.08.01 10:00
Emini daily chart
- The will likely get a second leg down after last Thursday’s (July 27th) outside down bar. The outside down bar is not enough to turn the market into a bear trend, but it is enough of a surprise to make the market go sideways for the next several bars.
- The market has held above the moving average (blue line) for over 40 bars. This indicates that the bull channel is strong and will limit the downside.
- Traders are happy to buy above the moving average when the momentum up is strong. However, traders will be less willing to buy far above the moving average once the market goes sideways. The moment average reflects the fair price, and buying above it is paying a premium. One will only pay a premium if they thought the market would be higher in a short period of time.
- The bears will probably get their second leg down in the next day or two. The July 27th bear breakout was enough of a surprise that the market will likely get a second leg down.
- Overall, the market will probably get a second leg down, test below the July 27th low and reach the moving average. Even if the market goes above the July 27th high first, sellers are probably not far above.
Emini 5-minute chart and what to expect today
- Emini is down 16 points in the overnight Globex session.
- The overnight Globex market sold off and is testing yesterday’s lows.
- The bulls want a double bottom with yesterday’s lows and a reversal up.
- The bears are hopeful that the overnight selloff starts a second leg down following last Thursday’s large outside down bar on the daily chart.
- Traders should assume that today will have a lot of trading range price action on the open. Most traders should consider not trading for the first 6-12 bars. By waiting on the open, a trader gains certainty about the day’s structure.
- On the open, traders should remember that only three possible outcomes exist. A trend from the open, a trading range open (breakout mode open), or an opening reversal. Out of the three, a trading range open is most likely.
- Most traders should try and catch the opening swing that often begins before the end of the second hour.
- It is common for the opening swing to begin following a double top/bottom or a wedge top/bottom. This means that a trader can often be patient on the open, wait for one of the patterns mentioned above to develop, and look for a credible stop entry to try and catch the opening swing.
- Lastly, traders should be prepared for a possible bear trend day as the bears will try and get a second leg down and test the July 27th high on the daily chart.
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.
