Back in the Bands

After a lower open overnight in the March 2026 ES futures contract, price turned around and tried to head for the high of the prior daily bar, as in the ES daily chart below (for the March contract). The lower open continued the swing-line downtrend, but that could change with a higher high bar.

ES Futures - Daily - Close Back in the Band

As we noted, Friday's close was the second consecutive close below the daily Bollinger Band. This diminished the odds of the next close being below the band, and today price did close back inside the band resetting the number of consecutive closes. But the day's action is a good illustration of why one should not (according to my paraphrase of Ira Epstein's trading guidelines) take new naked short positions in futures against the lower band. That is because price only stays outside of the band only about 5% of the time, and the Smart Money is likely at least taking profits on some previously established short positions at or below the bands.

Note, too, that the daily slow stochastic is only down in over-sold territory which often does not yet attract a lot of new money on the short side. It is not embedded. Also, the two most recent fractal locations have moved down to the bars shown.

We have in mind a count that could allow price to get back near/above the prior up (green) fractal. And we also have one that allows one to go lower and exceeded the prior down (red) fractal.

From an Elliott Wave perspective, we counted one way to get a 'five-up' today. We'll simply have to see if a retrace wave hold off of the lows or not, or whether that five wave continues into the overnight to make a larger wave.

Have an excellent rest of the evening,

TraderJoe