Inside Day

    Today was a slightly lower volume inside day compared to the prior down candle. This post serves only to be a reminder of one of Ira Epstein's key guidelines. Here is the daily chart of the ES futures.

ES Futures - Daily - Back Inside the Band

    On Friday, price had gotten down to the combination of the lower Bollinger Band and the 100-day SMA (green crosses), while the daily slow stochastic was over-sold only. As you know if you have watched any of Ira's videos or read some of the material here, this is a location where Ira would say, "This is not likely a place to make new shorts because the Smart Money is likely taking profits at the lower band. Price is only likely to close outside of the upper or lower band ~5% of the time." (Again, this is not trading or investment advice, just a paraphrase of a broker's guidelines.)

    So, the nice thing about this chart is that it shows this guideline in action on the daily chart. The reason for the guideline is that those Smart Money players that follow and use Bollinger Bands on the daily chart, can likely find a better entry for a short position - back inside the band. And that is where prices ended up today. Can price go back higher inside the band? It can. Must it? It doesn't have to. But often prices sometimes retreat to or near the 18-day SMA to figure out where to go next. They could do that. They just don't have to.

    From a wave-counting perspective, we said on the SPY hourly we could only count three waves down from the high. So, once again, if we're proceeding lower, then it will likely be by diagonal, but it is way too early to conclude that. And is it possible to go over the top again? It is - just with slightly lower odds because price is still closing below the 18-day SMA and still has downside bias. 

    Have an excellent start to the evening,

    TraderJoe