Outside Day Down

Today's ES daily candle made a slightly higher high before the open, then traded down in seeming expanding diagonal (or expanding triple-ZZ) fashion to make a new lower daily low coming within three points of the Nov 7 low.

This price action keeps the daily bias to the downside. As of the cash close, the close is below the lower daily Bollinger Band, and this happens roughly only 5% of the time. The daily slow stochastic is also now in over-sold territory, and this is not a condition that generally attracts new short money. In fact, some of the Smart Money may be covering some of their short positions here.

So, this could still be a situation where conditions are ripe for whippy trade. The next two targets, should the market decide to trade lower, are the 100-day SMA (green dashed line) and the prior gap close (purple dashed line).

With today being an outside day down, the outside day guidelines apply: "if the market takes out the high of an outside day down within the next two trading sessions, then it can be a trap for the bears." Otherwise, the bar could indicate continuation lower.

IF the market takes out the Friday Nov 7 low tomorrow, then it will have done it with more speed (that is, more impulsivity) than the prior down leg. And a daily expanded flat as a Minor B wave can still result. But there is no certainty that this will happen as of this time. We can get a lower degree flat, up, wave to form first, or a larger daily triangle can still be in the works.

Have an excellent rest of the evening,

TraderJoe