We gapped slightly below the bear flag and then went up all day almost closing the gap. Well done bulls. Small victory, but important one. Today’s action takes us one step closer to a scenario we laid out this weekend, that instead of a bear flag break down to next support (102-104 on the SPY) we would carve out a new range. If we base around these levels then the bottom of the flag will lose some relevance.
To put it bluntly, we’re still deep in bear territory, but it could have been worse. The bottom and top of the flag are the big areas to trade against, everything in the middle is no man’s land belonging mostly to day-traders. Bulls need to get away from bottom of range as soon as possible and bears need to break us down through $ES_F 1136 weekend low. For our type of trading, it’s one day at a time with no anticipatory trades.