S&P 500 E-Mini: Test of 4,500 Round Number Likely
2023.07.12 10:17
Emini daily chart
- The rallied yesterday, closing near its high. This is a decent entry bar for the Bulls following Monday’s second entry buy signal. The bulls are trying to get trend resumption up and a test of the 4,500 Big Round Number
- The daily chart is forming a triangle, which is a breakout mode pattern. The bulls want a strong upside breakout of the triangle, and the bears want the opposite.
- The bulls have kept the market above the moving average for several bars. This increases the probability that the market will get an upside breakout.
- In general, when the market develops a triangle, the probability typically favors trend resumption. The market has been in a bull trend on the daily chart, meaning the odds slightly favor the bulls.
- While the odds favor the bulls getting trend resumption up, it is not 60%. If the probability were 60% in favor of the bulls, the market would not be going sideways. Instead, it would race up to higher resistance.
- Overall, traders should remember that a triangle is a breakout mode pattern. Most traders should wait to see the breakout’s strength and decide if it is more likely to succeed or fail.
Emini 5-minute chart and what to expect today
- Emini is up 39 points in the overnight Globex session.
- The Globex market formed a strong upside breakout during the CPI report released at 5:30 AM PT this morning.
- The market formed a strong upside breakout during the report and is currently getting a second leg up.
- The U.S. Session likely has a decent size gap up. This increases the odds that the first reveal down will fail, and the bulls will get a second leg up.
- Since this gap up is late in a rally on the higher time frames, there is an increased risk that the market will reverse down. This means traders should be aware of the risk of exhaustion following this morning’s gap up. Therefore, today may have a lot of trading range price action.
- As always, traders should expect the first 6 – 12 bars to have a lot of trading range price action on the open.
- Since the gap up will likely be large, traders should be aware that the market will probably have to go sideways and get closer to the moving average.
- If bulls can get consecutive strong bull trend bars on the open, the market may form a brief bull trend from the open. However, it will likely not last all day.
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.
