ES: Weekend Update: Two Scenarios to Complete that Bear Market Rally

  • CastAwayTrader
  • November 13, 2022
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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:

ES-mini Daily chart

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:

ES-mini 30 min chart

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:

ES-mini Daily chart

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:

ES-mini, 30 min chart

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.

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