Pre-Open Market Analysis
The crashed on the 5 minute chart yesterday to below the open of the week. It began a reversal up from a 5 hour wedge bottom on the 5 minute chart in the final hour. That increases the chance of a continuation up early today. The open of the week is an obvious magnet.
If today closes below the open of the week, this week will be a bear reversal bar on the weekly chart. That would be a sell signal bar for a buy climax top. Traders would expect at least slightly lower prices next week.
As you know, I have been saying that the 2 streaks of 9 and 7 consecutive bull bars make a 10 – 20% sell-off likely to begin in September. It might have started yesterday. But the bears need follow-through selling today and over the next few days.
If today instead closes on its high, it will undo yesterday’s bearishness. Traders will then wonder if there will be one more new high before the selloff begins.
Overnight Emini Globex Trading
The Emini is up 5 points in the Globex session. Yesterday was a sell climax day on the 5 minute chart. The day after a sell climax has a 75% chance of at least a couple hours of sideways to up trading that begins by at least the 2nd hour.
The Emini reversed up from a wedge bottom at the end of the day yesterday. Traders expect a 2nd leg up to at least the start of the wedge, which was the 9 am PST lower high.
That is near the 3500 Big Round Number and the open of the week. Both are magnets above. Remember the bulls do not want a bear body on the weekly chart. They will try to get the week to close above Monday’s open. The closer the week closes to the low, the stronger the sell signal bar on the weekly chart will be.
The most likely outcome for today is a test of the open of the week and a trading range. There will probably be at least one swing up and one swing down.
Traders will then wait until next week to decide if yesterday was just a brief bear trap in a bull trend or the start of a 10 – 20% swing down. The bear case is currently more likely. But 1 or 2 big bull days will show that the bulls are still in control.
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.