S&P 500 E-Mini: Pullback in the Cards for Bears?
2023.09.12 10:40
S&P Emini Pre-Open Market Analysis
- The rallied above the 50% pullback from last week’s selloff.
- The Bulls have done an excellent job over the past three trading days. However, they will likely be disappointed, just like the bears.
- The market is in the middle of a trading range on the daily chart. Traders will see the middle of the range as a neutral zone and a bad location to establish a position, long or short.
- The bulls who bought during the rally up to the second leg trap on September 1st will probably use the rally this week to exit with a smaller loss. They hope the market will get back to the September 1st high, allowing the bulls to exit at the high close.
- More likely, the market will form a lower high, and the bears will get a brief 2nd leg down.
- The rally over the past two trading days is enough to disappoint the bears and probably limit the downside.
- Traders should be prepared for the rest of the week to have a lot of trading range price action and possibly form an inside bar with last week’s range.
- Lastly, the bears will probably disappoint the bulls today, limiting the upside.
What to Expect Today
- The Globex market has been going sideways in a trading range for most of the overnight hours with a breakout to the downside in the last hour.
- As always, traders should assume that there is an 80% chance of a trading range open. This means that traders should consider not trading for the first 6-12 bars unless they are comfortable with limit order trading and making quick decisions.
- Most traders should try and catch the opening swing that typically begins before the end of the second hour after forming a double top/bottom or a wedge top/bottom.
- The opening swing typically has at least a 40% chance of doubling the opening range. This provides excellent risk/reward for swing traders.
- There is only a 20% chance of a trend from the open. If today is going to become a trend day, there will be plenty of time to enter the trend’s direction.
- Traders should pay attention to yesterday’s high and the day’s open. Both of these price levels will probably act as magnets today.
- Lastly, trades should be prepared for the bulls to become disappointed. The bulls are hopeful that they can continue the follow-through buying today.
Yesterday’s Emini Setups
S&P 500-Emini-5-Minute-Chart
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 the 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.
