S&P 500 E-Mini Final Trading Day of July: Surprise Breakout in Store?
2023.07.31 11:16
Emini daily chart
- The reversed up after last Thursday’s (July 27th) large outside down bar. Today is the final trading day of July, which means traders should be open to the possibility of a surprise breakout up or down today.
- While the reversal up is good for the bulls, the upside is likely limited, and the best the bulls will get is probably sideways. This means that we are probably sellers somewhere above last Thursday’s high.
- Some bulls bought above last week’s high, hopeful that last Thursday’s upside breakout would be successful. Those bulls are now trapped after July 27th went outside down. Those bulls will likely be happy to exit breakeven around last week’s high.
- The daily chart is evolving into a trading range which means traders are becoming more interested in buying value rather than buying because the momentum up is strong. This means the odds favor a test of the moving average (blue line). This means the Emini will probably fall below the July 27th outside down bar and touch the moving average.
- Overall, traders should expect a 2nd leg down after the July 27th outside down bar; however, because the bull channel is tight, the market may go above the July 27th high before the bears get their second leg down.
Emini 5-minute chart and what to expect today
- Emini is up 8 points in the overnight Globex session.
- The Globex market has been in a bull channel for several hours.
- The bulls recently formed a strong upside breakout around 5:45 AM PT. However, the follow-through was met with the sellers.
- The bulls are hopeful that this will lead to a successful bull breakout of a bull channel. The bears will likely overwhelm the bulls, and the 5:45 AM PT bull breakout will fail and lead to a trading range.
- Traders should expect the open to have a lot of trading range price action. This means most traders should consider not trading for the first 6-12 bars. By considering not trading for the first 6 bars, a trader gains certainty on the day’s structure and can avoid any potential opening reversal common in the first half hour of the day.
- Most traders should focus on the opening swing that often begins before the end of the second hour. It is common for the opening swing to begin after the formation of a double top/bottom or a wedge top/bottom. This allows a trader to wait for the formation of one of the abovementioned patterns before placing a trade to catch the opening swing.
- Lastly, today is the month’s final day, meaning traders should be ready for anything. Institutions will be deciding on the close of the monthly chart, which increases the odds of a surprise move up or down today.
Friday’s Emini setups
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.
