S&P 500 E-Mini Enters Breakout Mode as Bulls Defend Support

S&P E-Mini Market Analysis

E-mini daily chart

• The daily chart of the E-mini continues to go sideways in a prolonged tight trading range following the early August rally.

• The bears tried to get a downside breakout on Friday, but they could not do it.

• Instead of forming a strong bear bar closing on its low, Friday formed a doji, which led to today’s gap up and disappointed the bears.

• The bulls hope the market will find support at the 7,700 round number and reverse up to test 7,900.

• Until the bulls get a clear upside breakout, the odds favor sideways trading, which limits the downside potential for the bears.

• At the moment, the odds still favor a rally and a test of the all-time high.

• However, because of all the sideways trading, the probability is becoming increasingly neutral, and the market is now in breakout mode.

• While the bears can get a downside breakout, the odds still favor buyers below.

• Even if the market reaches the September low, there will likely be buyers willing to scale in lower.

• Overall, the highest-probability outcome is more sideways trading until there is a breakout. The bulls see 8,000 as a magnet, but they need more energy for the market to reach it.

E-Mini 5-Minute Chart and What to Expect Today

• Today gapped up on the open, then rallied in a tight bull channel.

• The bulls got an upside breakout on bars 9 and 10.

• The breakout was strong enough to expect a second leg up, which the bulls got as the market rallied to bar 19.

• While the rally from bar 1 to bar 19 was good for the bulls, it was climactic, with decent selling pressure along the way.

• The bears had a strong reversal bar on bar 11, which increased the odds that sellers would scale in higher.

• The bears then got an endless pullback from the bar 19 high down to bar 40.

• The strong selloff to bar 40 was enough to increase the odds of a trading range, but it was not enough to create a bear trend.

• That increased the odds of a bounce that would relieve the trapped bulls who bought the bar 19 close and were willing to scale in lower (for example, by buying above bar 41 or at bar 54).

• The bulls are trying to get a second leg up back to today’s high to relieve the trapped bulls.

• The market is more bullish than bearish, so the odds favor a trading range or possibly a test of today’s high.

• The bears are trying to prevent the market from reaching today’s high.

• Next, the bears want a breakout below bar 52, followed by a test of today’s open.

Friday’s E-Mini Setups

Here are reasonable stop entry setups from Friday. Chart shows each buy entry bar with a green arrow and each sell entry bar with a red arrow. The 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.