S&P 500 E-Mini: Trapped Bulls Look for an Exit
2023.09.07 10:10
S&P Emini Pre-Open Market Analysis
- The gapped down yesterday and sold off below the August 24th breakout point high and the August 2022 high.
- There were scale-in bulls who bought the rally up to September 1st and got caught on the wrong side of a second leg trap.
- These bulls are now trapped in a losing trade and will probably look to exit on any reversal up.
- While the bears have done a good job with the overall selling over the past few days, the market will probably go sideways before it goes much lower.
- The bulls are still hopeful that yesterday is a 50% pullback of the rally that led to the September high. Next, they want another leg up that breaks beyond the September high.
- More likely, the market will go sideways over the next few days.
- Traders should be open to today being a disappointment bar for the bears.
What to Expect Today
- The market sold off during the overnight session after forming a rally into the close, following yesterday’s early morning selloff.
- The bulls hope the market will form a major trend reversal and rally during the U.S. Session.
- Most major trend reversals lead to minor reversals and sideways trading. This means that traders should expect the open to have a lot of trading range price action.
- As I often say, most traders should wait 6-12 bars before placing a trade. This is because there is typically an 80% chance that the open will form a trading range, which means the first 6-12 bars of the day.
- There is only around a 20% chance of a trend from the open up or down.
- Most traders should focus on trying to catch the opening swing trade. They will typically begin before the end of the second hour, following a double top/bottom or a wedge top/bottom.
- Traders should pay close attention to yesterday’s low and the day’s open since the bulls. The market may try and rally today and form a second leg up after yesterday’s rally into the close.
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 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.
