PRE-OPEN MARKET ANALYSIS
The Emini formed an outside down day yesterday. The bears are hoping that the bear trend is resuming.
However, the bulls would like at least one more leg up after the 3 day sell climax. They want this selloff to be brief and for the bull trend to resume.
But there were 9 and 7 day streaks of consecutive bull days last month. Bull streaks usually result in a selloff to below the bottom. Consequently, traders should expect this selloff to fall below 3200 before there is a new high.
Today is Friday and what happens today affects the appearance of this week’s candlestick on the weekly chart. The bears want this week to close below the open of the week so that it will have a bear body. Moreover, they want it to close below last week’s low. That would increase the chance of lower prices next week.
The bulls are hoping that the Emini closes above the open of the week. They would then have a better chance of a 2nd leg sideways to up next week.
However, unless the bulls get 2 or 3 big bull days, traders expect the Emini to work down to 3000 – 3200 this month.
50 DAY MOVING AVERAGE IS AN IMPORTANT MAGNET JUST BELOW
The 50 day MA is just a little below yesterday’s low. Many traders want to wait for the Emini to touch it before looking for a 1–3 day bounce, or possibly for a resumption of the bull trend. Therefore, the Emini might have to go sideways to down for another day or two before it can test 3450–3500, if it is going to test that level.
It might already have begun a move down to 3000–3200. We should find out in the next few days.
Traders want to see if it reverses up from the 50 day MA or breaks strongly below it. Traders might be waiting for Wednesday’s FOMC announcement.
OVERNIGHT EMINI GLOBEX TRADING
The Emini is up 17 points in the Globex session. Since yesterday ended with a sell climax, there will probably be at least a couple hours of sideways to up trading that begins by the 2nd hour today.
There is cluster of magnets around yesterday’s late trading range. That further increases the chance of trading range price action today.
The bulls want this week to close above last week’s low. Last week was an outside down week and therefore a sell signal bar on the weekly chart.
If this week closes above last week’s low, this week would be a weak entry bar. That would reduce the chance of a big selloff next week.
The bulls also want the week to close above the open of the week. This week would then have a bull body on the weekly chart. That would further reduce the chance of a strong selloff next week.
Finally, this week has been testing the February high, which is the breakout point for the August rally. The bulls want this week to close above that high. That would increase the chance that this week’s selloff was just a pullback to test that breakout point.
The bears always want the opposite. They want the week to close on its low, below last week’s low, and below the February high. It would then have a big bear body. This would increase the chance of lower prices next week.
YESTERDAY’S SETUPS
Emini 5 Min
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. I rarely also show limit order entries and entries on the close of bars. I do not want the lines to be distracting. If they are longer, I make them dotted. But, they have to be visible, so I make the shorter ones solid. Buyers of the Brooks Trading Course and Encyclopedia of Chart Patterns have access to a much more detailed explanation of the swing trades for each day (see Online Course/BTC Daily Setups).
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.
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.