S&P E-Mini Tests Bull Trend Channel Line

S&P Emini Pre-Open Market Analysis

• The formed an upside breakout of the triangle this week and is testing the top of the bull trend channel line.
• The bears hope this is an exhaustive bull breakout late in a bull channel.
• The breakout is strong enough for at least a small second leg up. This will likely limit the first reversal attempt down.
• The bears need to create more selling pressure to convince traders they are gaining control.
• The bulls have kept the market above the moving average for a month, which is a sign of strong buying pressure.
• The rally that began in early January is creating several open gaps, which is a small pullback bull trend.
• As I have said several times, the bears need to get close below the moving average in order for traders to consider that the daily chart is transitioning into a trading range.
• The bears managed to stop the buying pressure late yesterday. Next, they will try to create a strong bear close to convince bulls that the market is going to test down to the moving average.
• Overall, this week’s rally is strong enough that the odds favor at least a small second leg up. Bears need to get the market below the March 8th breakout point high and close the gap. This would show that the bulls are losing control. The bears have a long way to go before they will likely be able to take control of the daily chart. A trading range is likely the best they can expect.

What to Expect Today

• Emini is down 3 points in the overnight Globex session.
• The Globex market recently formed a downside breakout around 8 AM EST.
• The bears are trying to create a second leg down, and the bulls are hopeful that the selloff is exhaustion late in a bear channel on the 15-minute chart.
• Traders should expect a trading range open. This means that most traders should consider being flat for the first 6-12 bars.
• Today is Friday, so weekly support and resistance will likely be important. Traders should be prepared for a surprise breakout late in the day as traders decide on the close of the weekly chart.
• Yesterday’s low and the open of the day are likely important magnets today that traders should pay attention to.

Yesterday’s Emini Setups

Here are reasonable stop-entry setups from yesterday. I show each buy entry bar with a green arrow and each sell entry bar with a red arrow. 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.