Outside Day Down - FED tomorrow

Yesterday in the ES futures was an outside day, up. It had a lower low, a higher high, and a higher close. And it was day 'one-of-three' of possibly embedding lower. If the low of an outside day up is taken out in the next two trading sessions, it constitutes a trap for the bulls.

Today was an outside day down. It had a higher high, a lower low and a lower close. Thus, the trap above for the bulls was sprung. Further, we note the 18-day SMA has crossed below the 100-day in the daily chart, below.

ES Futures - Daily - Outside Day Down

However, today also being an outside day down, could result in a bear trap if the high of the outside day down is taken out in the next two trading sessions. Today is also day two-of-three of possibly embedding the slow stochastic. So, tomorrow is most at risk for potential reversal and not embedding (usually the daily slow stochastic does not embed. Sometimes it does.)

This flip-flop behavior can still be consistent with a flat correction being sketched out for a second wave, ii, as was suggested yesterday. However, tomorrow is also FED day, and a lot of price movement is possible in either direction or in both directions. Is it possible for the market to just 'give-way' lower here? It is. But, it is equally possible for a larger up wave to be made to make wave ii more proportional with the other waves.

Caution, patience and flexibility are warranted, especially given the nature of the report and press conference tomorrow.

Have a good start to the evening.

TraderJoe