S&P 500 E-Mini: Second-Leg Trap Is Likely
2023.09.06 10:46
S&P Emini Pre-Open Market Analysis
- The daily chart is forming a possible 2nd leg trap. The Bulls got a bull breakout with follow-through last week. However, it is a second leg up in the middle of an overall trading range.
- The bulls are hopeful that last week’s rally is strong enough for another leg up. Some bulls will scale in on any pullback.
- The bulls scaling into longs risk getting trapped by the possible 2nd leg trap.
- The bears are hopeful that the selloff over the past few trading days is strong enough to lead to a second leg down.
- The bears want to close the August 24 breakout point high, and the bulls will try their best to keep it open.
- Overall, traders will pay close attention over the next few days to see what kind of follow-through selling the bears can get. The bulls will try and reverse the market to end the possibility of a second leg trap.
Emini 5-minute Chart and What To Expect Today
- Emini is down 10 points in the overnight Globex session.
- The overnight Globex market has been in a bear channel for several hours.
- The bulls will try and convert the bear channel into a trading range and get a rally on the open.
- Traders should expect a trading range open in the U.S. Session. This means traders should be ready for a limit order market.
- There is at least an 80% chance of a swing trade developing after the formation of a double top/bottom or a wedge top/bottom. It is common for the swing trade to form before the end of the second hour.
- If traders want a higher probability, they should wait for a clear breakout with follow-through.
- Lastly, traders should pay attention to yesterday’s low and the day’s open, as both will likely be magnets during the U.S. Session.
Yesterday’s Emini Setups
SP500-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 nearly 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.
