S&P 500 E-Mini Analysis: Bullish Trends in Sight

S&P 500 E-Mini Market Analysis

• The index is approaching the August high and the top of the selloff down to the September 6th low.

• The rally up to the August high was strong enough for buyers below and a retest of the highs.

• The current rally up is strong, and the odds favor a second leg up.

• The bulls’ risk is getting big, which will increase the odds of a pullback over the next couple of days.

• The bigger the risk for the bulls, the worse the risk-reward ratio becomes. The odds are against the market going 200 points higher to 5,900 before it pulls back.

• This means that bulls will probably begin to take partial profits soon, betting that the daily chart is in a trading range.

• Yesterday, there was a bull inside the bar, which is a breakout pullback buy setup for the bulls. An Inside bar is always a variation of a High 1 or Low 1.

• Since yesterday’s inside bar is near the resistance of the August high, the risk that the market will retest yesterday’s inside bar high within 2 bars increases.

• This means the bulls may take profits today or tomorrow, leading to a pullback.

• The bears want the rally to the August high to become a double top, lower high major trend reversal. However, the current rally is too strong and increases the risk of sideways trading rather than a strong breakout below the neckline of the September 6th low.

• The market will probably go above the August high either today or tomorrow. The next important resistance level is the July All-Time High.

• Since the market is in a trading range, it may go above the August high but fail to go above the July high.

• The bears want the market to make lower highs and lower lows. They do not mind if the market goes above the August high. However, they want to protect the July high and create a reversal back down, which would become a lower high.

Anticipated Movements Today

• E-Mini is up more than 20 points in the overnight Globex session.

• The Globex market has been in a tight bull channel, with most of the bars above the moving average on the 15-minute chart.

• Because the daily chart is getting climactic, today will probably disappoint the bulls and fail to become a strong bull trend day during the U.S. Session.

• Traders should pay attention to the 5,730.25 price level, which is the August high and will likely act as resistance.

• Traders should also pay attention to the high of yesterday’s as the bears will try their best to get a close below it.

• Today will probably spend a lot of time testing the open of the day. The bears want to end the bull streak on the daily chart by getting a close below the open of the day.

• As always, traders should expect a lot of trading range price action on the open. This means most traders should consider not trading for the first 6-12 bars unless they can make decisions quickly.

• Most traders should focus on catching the opening swing that often begins before the end of the second hour, after the formation of a double top/bottom or a wedge top/bottom.

Setups from Previous Trading Session

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 E-Mini.