Emini breakout mode before budget reconciliation and tax reform votes
Updated 6:47 a.m.
Today is rollover day. Since December still has better volume, I will wait for tomorrow before trading March. On the daily chart, yesterday is a bad buy signal bar and a bad sell signal bar. Therefore, there will probably be sellers above yesterday’s high and buyers below its low.
The 1st bar today was a doji bar in the middle of yesterday’s trading range. That increases the odds that today will be another trading range day. Furthermore, it increases the chance of an early trading range. Traders need consecutive big trend bars up or down before they will be willing to swing trade.
Most traders wanting a swing trade should wait for a breakout. Or. wait to sell a 2nd entry sell signal near the top, or buy a 2nd entry buy signal near the bottom.
While today so far is Always In Long, limit order bears made money selling the close of the 2nd bear bar. This increases the chances that the Emini will be in a trading range for the 1st hour. If so, it will probably form both a double bottom and a double top. It would therefore be in breakout mode.
Pre-Open market analysis
After Wednesday triggered a sell signal on the daily chart, yesterday was a bad follow-through day for the bears. The bears were hoping for a 3rd consecutive bear trend bar on the daily chart. If they got that, it would have increased the odds of at least 2 legs down. It did not. This therefore makes the Emini neutral going into tomorrow’s budget reconciliation vote and the upcoming vote on the Trump tax cuts. Today will likely continue yesterday’s trading range trading.
Overnight Emini Globex trading
The Emini is down 1 point in the Globex session. After 2 big bear days, the Emini was in a trading range yesterday. With tomorrow’s budget vote to continue to fund the government, the odds are that it will be mostly neutral again today. However, day traders will always be ready for a strong breakout up or down. They will trade the trading range until there is a breakout.
Yesterday’s setups
Here are several reasonable stop entry setups from yesterday. I sometimes also show limit order entries and entries on the close of bars.
EURUSD Forex market trading strategies
The EURUSD daily Forex chart has sold off for 2 weeks from a wedge top. However, the selloff has many small bars with prominent tails.
In addition, it is at the 20 day exponential moving average and above the most recent major higher low. It is therefore more likely a bull flag than a bear trend.
The pullback on the daily EURUSD chart continues to grow. There is a 50% chance that it will fall to the November 21 low before the bulls will again buy aggressively. The lack of big bars up or down is a sign of complacency. It means that the market is waiting for more information. Tomorrow’s Congressional vote on a continuing budget resolution and the upcoming vote on Trump’s tax reform both have important financial implications. Either could lead to a big move up or down in all financial markets. Therefore, all are trying to get neutral before the votes.
Since the daily chart is in the middle of a 5 month trading range, the most likely thing that it will do after the votes is stay within the range. This is because most attempts to break out of trading ranges fail.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart has had a small range overnight. Since this 2 week selloff is a bull flag and it is at support, bulls will look to buy for a swing up. The 240 minute chart is in a wedge bear channel and above the November 21 major higher low. The odds favor a bull breakout today or tomorrow.
Whenever the odds favor one direction, traders always need to be ready for the opposite. Therefore, there might be a strong bear breakout below the bull flag. The daily chart is in breakout mode. While a wedge bull flag has a 60% chance of a bull breakout, there is a 40% chance of a bear breakout. Day traders will continue to scalp until the breakout comes. Yet, they need to be prepared for a swing trade up or down.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
The Emini reversed up from below yesterday’s low, but stalled back at Monday’s low. Monday was a sell signal bar on the daily chart.
Today had a weak rally and then spent the 2nd half of the day going sideways. Traders want a neutral market going into tomorrow’s vote on deferring the continuing budget resolution. There is always a potential for a surprise outcome, which could lead to a big breakout up or down. However, the odds are good that there will not be a surprise. This means that tomorrow will probably be another mostly sideways day. Traders will then wait for the next catalyst, which might be the tax reform vote.
See the weekly update for a discussion of the price action on the weekly candlestick chart and for what to expect going into next week.
Traders can see the end of the day bar-by-bar price action report by signing up for free at BrooksPriceAction.com. I talk about the detailed S&P Emini futures price action real-time throughout the day in the BrooksPriceAction.com trading room. We offer a 2 day free trial.
When I mention time, it is USA Pacific Standard Time (the Emini day session opens at 6:30 am PST, and closes at 1:15 pm PST). You can read background information on the intraday market reports on the Intraday Market Update page.
