Stock Markets Analysis & Opinion

E-Mini: Likely Bounce for a Day or Two

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Emini daily chart

  • The S&P 500 Futures gapped down yesterday and reversed up after testing the May 16th low and the apex of the month-long triangle.
  • Emini likely bounce over the next day or two as traders take profits. However, the selloff was strong enough that a 2nd leg down is likely, even if there is a deep pullback first.
  • The bulls who bought the close of May 17th or the low two bars later are disappointed and trapped. They will likely use any bounce to exit their losing trade with a smaller loss or break even if they scale in lower.
  • The bears know the bulls are trapped. They will sell any rally expecting the bulls to exit longs.
  • There are bears who sold the May 4th high and got trapped on the May 5th breakout. Those bears never could exit their losing trade back at the May 4th high. This means the market will probably reach the May 4th high and allow the trapped bears out of their trade.
  • Overall, the bears expect a 2nd leg down after the recent four-bar selloff from the May 19th high. The bears will try to break below the May 4th low and reach the 4,000 considerable round number. However, if they are going to reach 4,000 they need to show more signs of strength.

Emini 5-minute chart and what to expect today

  • Emini is up 30 points in the overnight Globex session.
  • The Globex went sideways for most of the overnight session until rallying late in the session.
  • On the 60-minute Globex chart, the bulls have broken above the bear trendline (May 23rd – May 24th). Next, the bulls want to form a major trend reversal. However, they will probably need to test the low of the Globex session 4,1355.5 before they have a credible high-low major trend reversal.
  • The bears want a large double-top bear flag and trend resumption down.
  • Traders should assume the U.S. Session will have a lot of trading range trading.
  • As I often say, most traders should wait for 6-12 bars before placing a trade unless they are comfortable with limit order trading.
  • Most traders should focus on catching the opening swing that often begins before the end of the second hour.
  • The opening swing often occurs after the formation of a double top/bottom or a wedge top/bottom. This allows a trader to enter on a strop entry and allows a trader great risk/reward on a reasonable swing trade.
  • The most important thing to remember is to be open to anything happening and never deny what is happening on the chart.

Yesterday’s Emini setups

S&P 500 Emini 5-Min Chart

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