A few days ago I stated that it was extremely stinky that in context crude could not even break it’s daily low. This lessened the odds of a bearish resolution.
Today we have price action which changes from a lessening of the bearish advantage to a bullish advantage.
The gold standard of trading is holding onto your opinions so weakly that you don’t hesitate to change them when the facts change. Which is why (with the exception of our gracious host and a few lonely others) mostly bloggers and prediction monkeys suck at trading.
Once you put your ideas out into the ether it becomes very tempting to hold on to them, which is one of the many ways we fuck ourselves over.
The highest probability is now a more complex correction. The market had it’s easy phase, and is probably going to go through it’s “I’m a confusing asshole” stage. We have approximately 60% odds of a 1R win here (being conservative) – betting odds. When the market is probably going to be “I’m a confusing asshole” it makes logical sense to use a wider stop and an easier, more attainable target.
Let’s digress a little to a topic that has come up in the comment section. User Grant, who actually has a lot of knowledge about outside periods, pointed out the OP near the bottom. It’s worthwhile to discuss what outside periods mean.
An outside period happens when a market first tries to go down then goes up and then tries to go down, or vice versa. It is very common for traders to trail stops at daily highs (for shorts) or lows (for longs), and the outside period is fuckery which shakes them out of their positions, and shakes eager counter trend traders getting positioned prematurely.
What does it mean? It’s a clue that traders are banking profits in a long running trend, and being replaced with new traders. New traders are weak hands, who are by definition easily fucked with. It doesn’t mean the trend will end, or has to end. An outside period towards the end of a trend means that the trend becomes more fragile. An external shock after an outside period will probably have a greater effect than normal.
An outside period at the beginning of the trend is a sign the bus is leaving empty, which bodes well for trend continuation.
An outside period in a trading range is entirely normal, traders getting faked out of their positions, chopped short and long .
Overall, statistically there is no significant edge with entering on outside periods, excepting large range outside periods closing near the highs at the start of a bull trend.
Today in indexes the market continues to do nothing significant. It’s tempting to not pay attention to this price action, but we really shouldn’t be so lazy.
We previously hypothesised that the market was probably transitioning into a trading range. That is still the highest probability, though the lack of follow through by the bulls has opened the door for the bears to take back control. There is no weakness yet, but any weakness here would likely be punished. The odds are ever so slightly in favour of a bearish resolution here. Not really betting odds, but maybe soon.