Stock Markets Analysis & Opinion

S&P 500 E-Mini: Buyers Lurk below April 26 Low


Emini daily chart

  • The Emini gapped down yesterday and broke below the April 26th low. However, there were buyers below its low, and yesterday’s bar closed with a tail, above the April 26th low.
  • Just as there were sellers above the April 28th high, there are probably buyers below the April 26th low, and as expected, the overnight Globex market has rallied 40 points from the April 26th low.
  • The odds are that the Bears will get a second leg down after the past three consecutive bear bars. However, the market is forming a large expanding triangle (see Encyclopedia chart below). Expanding triangles are a form of breakout mode and increase the odds of more sideways trading. This means that the pullback will probably be deeper than what the bears want.
  • Traders have to be prepared for a successful double bottom with the April 26th low. If today is a strong bull reversal bar, and next week forms 2-3 strong bull bars, the market could break above the May 1st high and get above the February high.
  • The bears have still failed to close the May 22nd breakout point high. They have tested it twice, but the bears need to do more to convince traders that the possible measuring gap from the March 13th low to the March 22nd high, projecting up to 4,300, will fail.
  • There are trapped bulls who bought the pullback of the May 1st low, and they likely scaled in lower. These bulls will be disappointed enough to sell the first reversal up. This means sellers are probably around the 4,135 price level, around a 50% pullback of the recent selloff.
  • Overall, traders should expect the bears to become disappointed over the next few days, just like the bulls were disappointed by the breakout above the April 18th high.

Emini 5-minute chart and what to expect today

  • Emini is up 38 points in the overnight Globex session.
  • The overnight Globex session broke below the April 26th low and rallied over 40 points.
  • Traders should expect today to disappoint the bears since the daily chart is in a trading range.
  • Trading ranges often have strong sell vacuums to support, such as the April 26th low, fail, and reverse.
  • As I often say, traders should assume that the market will have a lot of trading range price action on the open and go sideways for 6-12 bars. This means most traders should wait for 6-12 bars unless comfortable with wide stops and limit order trading.
  • Most traders should try and catch the opening swing that will often begin before the end of the second hour. There is typically a 40% chance that the opening swing will double the range of the day when it happens.
  • Since there is greater than an 80% chance of an opening swing, this provides a great risk/reward for traders.
  • Lastly, the opening swing often forms after a double top/bottom or a wedge top/bottom. So a trader should look for one of these patterns. See the chart of the four common outcomes on the open for examples. Notes, this is a slide from the Encyclopedia of Chart Patterns that is available for purchase for members that have owned the course for more than 60 days.
  • Overall, traders should pay close attention to the open of the day as the odds favor a lot of trading range trading today.
  • Because the Globex market broke below the April 26th low and reversed, traders should be open to a possible bull trend day, which would disappoint the bears on the daily chart, reminding traders that the market is in a trading range.
  • Today is Friday, so weekly support and resistance are essential. Traders should be open to the possibility of a strong breakout up or down late in the day as traders decide on the close of the weekly chart.

Yesterday’s Emini setups

SP500-Emini-5-Min ChartSP500-Emini-5-Min Chart

Big Gap Up - 4 Common OutcomesBig Gap Up – 4 Common Outcomes


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