Outside Key Reversal Day Down

ES prices made higher highs in the overnight and then began trading lower before the cash market opened. As the ES daily chart below shows, prices continued trading lower until they undercut the prior day's low and they closed lower. This is the very definition of an outside-day-down but when the action occurs at the highest point in a rally, it is also termed an outside key reversal day.

Readers of this blog were shown yesterday how a turn could occur at the equality measurement from the 13 March low. So far, it has. Prices also turned at the upper daily and weekly Bollinger Bands.

As with any outside day down, the consideration is that if the high of the outside day down is taken out within two trading sessions, then it constitutes a trap for the bears. This could happen if today is part of a fourth wave. If it does, so be it. The next up (green) fractal is the one at the 14 February (Valentine's Day) high. Note that an additional fourth wave is not required in the up count. I am only suggesting what a higher wave would indicate today was IFF a higher high than today were made.

IFF a higher high is not made, then it would suggest the triangle scenario we outline previously in this post (see LINK) might well be under way. In that case, the 13 March low might well be expected to be undercut as well.

Just remember the daily bias is still up on the chart and the regular calculation of the daily slow stochastic can now be considered to be embedded. Further, there is no swingline down trend yet.

Have a good start to the evening,

TraderJoe