Today for the equities market, as measured by the ES E-Mini S&P futures, it was a another lower low day. It was also a second daily close under the lower daily Bollinger Band (18), as in the chart, below.
|ES Futures - Daily - Second Close Outside Lower Band|
As most know by now from reading this site (see this LINK) price has a random chance of closing outside of the daily bands of about 5% on any given day, at least that is the intent of the construction of the Bollinger Band (assuming prices are distributed in a Bell-shaped, or Gaussian, curve - which they are most definitely not!).
However, a rule of thumb is to subtract 1% for every consecutive close outside of the band. Therefore, with two closes outside of the bands the chances of prices closing below the bands on Monday drops to about 3%. There have been instances of 5 - 7 consecutive closes outside of the bands, and that is why the rule of thumb is only that.
Since the "smart money" usually takes some money off the table at the bands, it is sometimes wise to recognize that fact in wave counting. Notice what happened to prices at the middle of May, and the end of May when prices closed outside of the bands. (Past performance is no guarantee of future results).
Further, the daily slow stochastic is in oversold territory, although it has not curled up yet. It is possible and perhaps even somewhat probable that prices will come down to touch the 100-day SMA on Monday and / or Tuesday. But it does not have to occur. So, once again, it is time for caution, calm and patience.
And a reminder: upward wave counting will not begin until there is a higher high day.
Have a good evening and a good start to your weekend.