As such, we’re now in a second consecutive outside bar. This is an OO (outside-outside) setup, which is a Breakout Mode pattern. Traders theoretically will buy above and sell below. Because it is coming in a strong bull trend and on a reversal up from the bottom of an 8-day tight trading range, and yesterday closed with a big bull body, a bull breakout is more likely.
Since the daily chart is in Breakout Mode, the breakout could be strong and last for a few days. Friday’s unemployment report is the next catalyst. The E-mini might continue its tight range until the report is released.
And what about a bear breakout? For over a year, the bulls have bought every strong 1- to 3-day selloff. They will continue to do that until it no longer works. That would require a big move down and probably more than just 3 days down. Until then traders will continue to expect higher prices.
On the monthly chart, July closed near its high, and it was the sixth consecutive bull bar on the monthly charts. I have been saying that August should trade above the July high. Yesterday could be the set up that leads to that new high.