The Inside Day
Today’s session was fairly textbook as it all
started with Sunday’s gap up open that was quickly reversed and broke below the
December 31 low at 2037. In the weekend report, we noted that the bulls needed
to hold 2016-2020 support area for the bounce scenario to remain valid, but
bears quickly eliminated that potential by breaking support decisively around
midnight. This breakdown created an immediate flood to the grey support area
located at 1998-2000. Basically, the price and pattern was very similar to the
green line projection 2016->2020->2000 as the white and red projections
were invalidated.
Fast forward, when the day session opened and the flood
continued until the December 14th low at 1983~ was retested that created
a double bottom setup. Our hourly extreme oversold “A+ Tier” setup was
confirmed at 12PM lunch time and ES was trading at 1988. This provided us with
a decent trade that had initial targets of 2010 and 2020 with a
risk/invalidation level at 1975. What happened in the next few hours was just a
typical first try rejection at the 1HR 8EMA level. It later formed a higher low with the massive
hourly bull bar that erased the morning losses. At the end of the day session,
the minimum target of 2010 was hit and now the 2020 target could be upgraded to
at least 2030 depending on the overnight session setup.
What’s next?
Daily closed at 2009.5, this is still below all the daily
moving averages. The candle is also a large bottom wick sticksave that has a
day range of 63.25 points. This means that it’s very likely the next couple of
days will be trading inside this range.
The immediate target is 2020. The 50% fibonacci retracement
resistance is at 2027.63 and 61.8% at 2038.81. This rally is being treated as a
deadcat bounce for the time being (similar to how we treated the December 21st
bounce as deadcat bounce that extended beyond expectations.) Also, any dip overnight/tomorrow
should not exceed 1995 or else bulls risk a hard rejection by the bears to
continue the daily bearish chart context. Overall, this means that the current thesis
for this deadcat bounce could go as high as 2027-2039 before we change our
stance that the bears are deemed too weak if bulls make it higher than that. Please
view the last chart with the current white line projection as our primary bias if
confused.
For the unexpected outside day scenario, bears must break
below 1980 and maintain a solid bear train to the 1970 and 1950 key support
levels.
Current Plan for
tomorrow:
It’s a high probability inside day tomorrow within the
2043.5 vs 1980.25 range, so we will attempt to buy the lows or sell highs only
to avoid getting bad entries on trades. Ideally, an overnight/morning pullback
to 2002-1998 to add more longs for a quick trade. It really depends on how
overnight session does when we wake up tomorrow and reassess the roadmap.
