Today was a rare day in the markets, a day where the S&P futures traded down below S4 and traded above R4. This action being a function of a quiet day yesterday which made the pivots tight, coupled with a range expansion day today.
I like to think of myself as someone that studies market behaviour and today the market wanted to squeeze the shorts. The two reasons it did not happen was 1) the energy it takes to cross both a breakdown and breakout pivot in the same day did not leave much energy for the squeeze and 2) with the S&P futures just under resistance, perhaps the market can suck in some shorts before the squeeze.
I believe that markets want to complete certain moves and if they do not complete that move in one day, very often the move will be completed early in the next day. Although the market traded well off lows, the pain of a squeeze was just not there.
My trading plan for tomorrow is as follows: I believe we gap up on the open, rally for 40 minutes or so, pull in to support quickly after that and then the squeeze will truly begin around 10:30 am. Think of it as gap, pullback, squeeze.
What is my rationale for this?
1) Markets want to complete moves, we covered this.
2) The timing makes sense because a common technical rule is the 10 am gap rule, if we gap on a certain day and the gap HAS NOT been filled by 10 am, the direction of the gap is thought to be the dominant direction for the day.
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