Stock Markets Analysis & Opinion

S&P 500 E-Mini: Bulls Want Strong Entry Bar Today

  • The E-mini S&P 500 futures broke below the February low yesterday and reversed up as a bull bar closing near its high.
  • Bulls want a strong entry bar today, increasing the odds that the market reaches the April 18 low (4,364.5) and possibly higher.
  • Bears see yesterday as a breakout pullback short and will try hard to get a successful bear breakout of the February lows. They want the market to get down to the 4,000 big round number and 3,600, which is a measured move down of the February – March trading range.
  • Another magnet is 3,840, which would be a 20% correction in the E-mini.
  • Bulls see yesterday as a possible nested wedge bottom with (1/24, 2/24, 5/2) and a smaller wedge for the third push down (4/25, 4/27, 5/2). The smaller wedge can be viewed as a micro double bottom that had a failed breakout on 5/2 (this creates a wedge pattern).
  • Bulls have had decent buying pressure with the two bars on 4/25 and 4/28, which increases the probability for the bulls. However, the probability is not yet high for the bulls.
  • It is reasonable for most swing bears to exit above yesterday due to the risk of two legs up. Also, the risk of testing the April 18 low is real, and the market will probably have to get back to it.
  • One crucial thing to keep in mind is the market got down to the 20 period moving average yesterday on the monthly chart for the first time since 5/29/20.
  • While the odds favor buyers at the moving average, the market usually falls at least 100 points below the moving average before reversing back up, which makes me think the market will have to get down to 4,000 before it can go much higher. If this month is a big bull bar that closes around 4,500, it could drag the moving average up higher, giving the impression that the market went 100 points below the moving average.
  • More likely, that will not happen, and the market will have to go lower to satisfy a test of the moving average. Look at a monthly chart since 2009 and try to find when the market went less than 100 points below the moving average when it was away from the moving average for more than 20 bars. 

E-mini 5-minute chart and what to expect today

  • E-mini is up 8 points in the overnight globex session.
  • Bulls want today to be bull trend day which would be an entry bar on the daily chart for the 5/2 signal bar.
  • Bulls will look for a trend from the open and look to buy a bull breakout or a credible bottom such as a double bottom or wedge bottom.
  • Bears want to prevent a strong trend day today, and at a minimum, the bears want today to be a trading range day which would disappoint the bulls.
  • Bulls have a reasonable chance at a bull trend day today, more likely, they will be disappointed, and today will close as a trading range day, disappointing both the bulls and the bears.
  • Overall, while today has the potential to lead to a bull trend day, as Al always says, “price is truth,” so one has to trade the market that is in front of them and not what they hope will happen.
  • If the market opens sideways, traders will trade it like a trading range until a credible breakout occurs.

Yesterday’s E-Mini setups

E-Mini 5-Minute Chart



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