I still believe this rally is a corrective three wave bounce in wave B up. Below I will share with you two most probable path for this rally to complete.
(1) Scenario 1: The most painful for bulls:
Under the scenario 1 the spiky move up triggered by Consumer Price Index numbers published last Thursday is a corrective subwave -b- up that should be followed by a sharp drop in subwave -c- down.
Let’s zoom in to 30 min timeframe:
Under scenario 1, a sharp drop down to 3,805 (with potential extension to 3,760) will be followed by a five wave up rally in wave (c) targeting the Red Target box. That rally would complete the whole (a) up (b) down, and (c) up structure of a large corrective wave B up.
Upon completion of a large pullback in wave B up we should expect another three wave or five wave move down targeting new lower lows under 3,500.
(2) Scenario 2. The most painful for bears:
That scenario 2 is the most painful for bears because after a strong spiky move up bears will not get a deep retrace they have been praying for:
The scenario 2 argues for a shallow pullback down in a micro subwave -c- of wave -iv- down followed by another rally in a micro wave -v- up.
In conclusion:
(i) we have two feasible scenarios. Both scenarios allow bulls to push higher after a pullback, and
(ii) The main uncertainty is how big that immediate pullback will be, and
(iii) according to both scenarios, upon completion of one more rally we should expect ES -mini to roll over and start another strong leg down that will most likely continue in 2023 and will be targeting new lower lows under 3,500.