An Inside Day

Tonight, I want to return to a topic that is near and dear to my heart.
Let's talk about inside days.

Inside days are simply days of range contained within a larger previous day's range. They reflect indecision. They show a coiled spring being wound up. They represent market opportunity in real time.

Today was an inside day. This means that the high on the S&P 500 Index was 1284 which was lower than Thursday's high of 1286.60. The low was 1267.53 which was higher than Thursday's low of 1262. Q: See how the entire daily range today is contained within Thursday's range from high to low?

Now, inside days tend to produce explosive moves. If the price goes higher than the outside day high, then you will see an explosive increase in price. If the price goes lower than the outside day low, you will see prices move with conviction lower.

Today was an inside day.

If prices top 1286.60 (Thursday's high), then we should see a price move higher to 1310. The price move up should equal the length of Thursday's price range. Now, here's the thing---While it is good to anticipate a price move to 1310, it is also likely to be a terminal move. 1310 might be it and it might then be time to go home. Time to get out, as they say. That's my thinking.

In the meantime, please note the historical precedent. The May 2010 Flash Crash was preceded by a tremendous outside day on April 27, 2010. Several inside days followed, thus building up pressure for the waterfall decline on May 6, 2010. Similarly, we saw a tremendous outside day on September 18, 2008 (I think) followed by several inside days. Pressure was built up before the low of the outside day was breached, thus producing the Crash of October 10, 2008.

Conclusion.

Inside days lead to predictable and exciting price moves. The important thing is to be right with the trend. If you are on the side of the trend, you will make money when the inside day breaches the outer limits of the outside day. (For more details, google "Larry Williams" and "Inside Days.")

Your newsletter writer,

Wink

Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.