Emini Buy Climax Test of 5,700

Trading Update: Thursday July 11, 2024

S&P Emini pre-open market analysis

Emini daily chart

• The Emini is getting a strong buy climax, the 5,700 big round number, and will probably have to test near it today or tomorrow.
• Round numbers are magnets, and since the market is in a strong bull rally, traders may not be willing to take profits until the price level of 5,700.
• While the rally up is strong, it is also climactic late in a bull trend. Bull trends often transition into a trading range after a buy climax. Another way to think of this is that trends often end with a climax. This is due to the market not having enough buyers left to buy high.
• Bulls will likely see the rally up to 5,700 as a great opportunity to take partial profits and look to buy lower after a couple of legs sideways to down.
• The bear will see this as an opportunity to add to short positions. Traders selling here are betting on regression to the mean, the moving average. They are strong bears who are willing to scale in higher.
• Because the rally is strong, the best that the bears can hope for is a trading range. However, the pullback can be deep and tested down to the 5,500-price level as well as the moving average, which probably will over the next several weeks.
• Overall, the bulls have done a great job with the rally. However, the rally is late in a bull trend, which increases the odds of the market getting a reversal down over the next 5-6 months, going into the end of the year.

Emini 5-minute chart and what to expect today

• The Globex market rallied during the 8:30 AM EST report, breaking above the 5,700-round number.
• Because yesterday was climactic, today will probably disappoint the bulls.
• There is a 75% chance of a trading range lasting for at least two hours, beginning before the end of the second hour. There is a 50% chance of follow-through buying on the open, followed by a 75% chance of a trading range beginning before the end of the second hour.
• This is an important area of resistance and will increase the odds of profit taking up here. This means that today will probably close below the 5,700-round number.
• Traders should expect a trading range to open and for the market to go sideways for the first several bars. This means that most traders should consider not trading for 6-12 bars unless they are able to make quick decisions.
• There is an 80% chance of a trading range open, and only a 20% chance of a trend form the open.
• Most traders should try to catch the opening swing, which often begins before the end of the second hour, after forming a double top/bottom or a wedge top/bottom.

Yesterday’s Emini setups

Al created the SP500 Emini charts.

Here are reasonable stop entry setups from yesterday. I show each buy entry bar with a green arrow and each sell entry bar with a red arrow. Buyers of both the Brooks Trading Course and Encyclopedia of Chart Patterns have access to a near 4-year library of more detailed explanations of swing trade setups (see Online Course/BTC Daily Setups). Encyclopedia members get current daily charts added to Encyclopedia.

My 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.

If the risk is too big for your account, you should wait for trades with less risk or trade an alternative market like the Micro Emini.

EURUSD Forex market trading strategies

EURUSD Forex daily chart

• The Bulls created a strong entry bar today, after yesterday’s inside bar.
• The market has been Always In Long ever since the bull breakout on July 4^th, and the odds favored a 2^nd leg up.
• The daily chart has had so much trading range price action over the past several months, and on the higher time frames, is in a contracting triangle. This increases the odds that the daily chart is going to have several legs up and down, ultimately disappointing swing traders.
• So far, the bulls have a strong bull bar today; however, it is testing into resistance, the June 7^th high. This increases the odds of disappointment, which can come from a trial above today’s high or bad follow-through over the next couple of days.
• The bears want a double top and reversal down with the June high.
• Because the rally up to the July high is strong, the odds are against a double top. Traders must assume that the bears have at least a 40% chance of getting a double top and reversal down since the market is in a trading range.
• Overall, the bulls will probably be disappointed, and the market will have to pull back for a couple of legs.

Summary of today’s S&P Emini price action

Al created the SP500 Emini charts.

See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.

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Trading Room

Al Brooks and other presenters talk about the detailed Emini price action real-time each day in the BrooksPriceAction.com trading room days. We offer a 2 day free trial.

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Charts use Pacific Time

When times are mentioned, it is USA Pacific Time. The Emini day session charts begin at 6:30 am PT and end at 1:15 pm PT which is 15 minutes after the NYSE closes. You can read background information on the market reports on the Market Update page.

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