#macro #trading setup #daily
In our macro update posted yesterday, I concluded that “bulls have room for one more push higher into the apex of a wedge”.
Today we got a strong rally making a higher high:
First look at those blue vertical lines.
They connect major turning points in 2022.
The beauty of those lines is that they stand apart at fixed and equal number of days. So we see a pretty stable cycle. From the top made on Sep 13th that cycle points to Dec 6th as a potential major top.
Then note that red trend line that connects three lower highs in 2022. ES is approaching that trend line from below.
Now look at two retracement fibs at the right side of the screen:
66.7% retracement is the strongest fib in our toolbox.
ES has only slightly overshot it tonight. It is reasonable to expect at least a temporary bearish reaction pushing ES-mini back under 4,060.
Note that we got three waves down (labelled (A)) followed by three waves up (labelled (B).
Note that a corrective wave X down made a lower low. That is a strong indication that this rally is based on a shaky ground. This rally came up out of a structure that could not be counted as a complete corrective structure because that wave X made a lower low.
The July – August raly could have been a start of a new trending five wave up move. Because it started off a complete looking A-B-C down corrective decline.
To complete that structure we need to get either a five wave or a three wave large decline in wave (C) targeting at least a slightly lower low under the low made in October.
Let’s zoom-in to review closely the (a)-(b)-(c) up structure of that rally off the Oct lows:
This spiky move up could complete the whole rally.
An alternative most painful scenario would consider it as a subwave b up:
You could say that looks unreasonable. What if I tell you that we had exactly the same pattern only two weeks ago?! I circled it on the chart above.
In conclusion:
We are going to get a truly wild whipsaw the next two trading days because PCE will be released at 8-30 AM on Thursday and Non Farm Payroll will be released at 8-30 AM on Friday. Both releases normally bring heightened volatility comparable to FOMC days.
On top of that, tomorrow we start a new trading month. The first three trading days of a new month quite often brings heightened volatility…