S&P e-Mini: A Study in Market Structure

S&P e-Mini & Market Structure

The S&P e-Mini is my favorite market to trade.  Because of the liquidity, the market typically has excellent structure.  What is structure, you might ask?  It’s the areas of support and resistance that the market creates and reveals itself on the chart.  When a market is actively traded like the S&Ps, it is usually well-behaved and creates obvious market structure, which it then respects.

Trading Today’s S&P e-Mini Market Structure

Today’s S&P e-Mini trading shows excellent and highly tradable market structure.  After the US open, the market formed a high at A, but showed little interest in reversing direction, as is frequently seen around the first half-hour mark of trading.  Instead, the market rallied up an over the swing high at A.  Note the strong volume on the rally at B driving a 10-point rally to a new high.

The market fell back to support at A and triggered a Wyckoff Spring at C.  Normally, this kind of setup is a strong one, but today it just didn’t result in higher prices.  A trade taken at C was scratched just after the high at D when the market said by its own actions it wasn’t going to be a typical Spring and make new highs.

The S&P e-Mini came back to the level of support first created at A and strengthened by the price action that occurred after B,   Note the volume and the price action.  There was no supply on the pullback to E.  The strong price action at E created another long opportunity.  This time, the resistance at the highs of B and D was broken.  A diagonal trend channel set the target for this trade allowing for a profit target of from 8 to 10 points depending on entry and exit.  A nice trade in the S&P e-Mini.

The Importance of Market Structure

Simple, straightforward and easily seen, market structure is the most important thing to know about the markets you trade.  It tells direction, support, resistance, trend, congestion, mark-up, and mark-down.  And, when used correctly, structure informs entry and exit.