E-Mini Forming Tight Trading Range

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Emini daily chart

• S&P 500 Futures forming tight trading range which is a triangle.
• The market has formed an ioi pattern (inside bar followed by an outside bar followed by an inside bar). These patterns (ioi) are meaningless in a tight trading range as they are breakout mode patterns.
• The bulls see yesterday as a bull bar closing on its high. They want today to lead to a strong entry bar and trapped limit order bears selling above yesterday’s high. The Bulls will likely be disappointed with today, assuming it triggers the buy above yesterday. This means that the odds are that the bulls will be reminded that the market is in a trading range.
• Traders should assume that the market is in breakout mode and is very close to neutral.
• While the odds might slightly favor the bulls following the rally that began on March 13th. The market would not go sideways if the bulls had a big advantage.
• The bears see the market forming a lower high with February. Next, they want a downside breakout and a test of the 4,000 Big Round Number.
• Traders making money right now are limit order traders betting against successful breakouts. Eventually, these countertrend traders will get trapped by a successful breakout and be forced to take a loss.
• When a successful breakout happens, it can be quick, so traders must be ready. However, at the same time, they must be patient, knowing that eventually, a successful breakout up or down will happen.
• The market is finding much agreement with 4,150 as it is the midpoint of the past month on the daily chart.
• Overall, traders should be patient and remember what Al always says: “Until there is a breakout, there is no breakout.” This means a trader cannot be too eager.

Emini 5-minute chart and what to expect today

• Emini is down 10 points in the overnight Globex session.
• The Globex market continues to go sideways in a relatively tight range on the 60-minute chart.
• As stated above, the Emini on the higher time frames is in breakout mode, which means the probability is close to 50%.
• Traders should be neutral going into U.S. Session and expect a lot of limit order trading. As I often say, traders should assume that the first 6-12 bars will be a limit order market and have several failed breakouts.
• Traders should pay close attention to the open of the day. With the market likely having a lot of trading range price action, traders should be prepared for the day’s open to be a magnet for most of the day.
• In general, traders should use caution with the first hour on the open. This is because the open has a higher probability of lower probability events happening as the market decides on the opening swing.
• There are 81 bars on the 5-minute chart, and a trader only needs a few good trades daily to do well. This means that a trader does not have to trade the whole day. By waiting for 12 bars, a trader can gain certainty on the open and the type of day the market will form.
• Lastly, most traders should focus on the opening swing that often begins before the end of the second hour. It is typical for the opening swing to start after the formation of a double top/bottom or a wedge bottom/top. A valid stop entry typically leads to the opening swing with decent probability and good risk/reward.

Yesterday’s Emini setups

SP500 Emini 5-Min Chart

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