ES: Macro Update: I Continue to Expect a Trip to 3,600

  • CastAwayTrader
  • January 8, 2023
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$ES #Macro #trading setup

This is the straightforward very bearish count that was widely adopted by the market in Dec 2022:

ES-mini Daily chart, “Very Bearish” scenario

In November – December everyone expected the market to crash to new lower lows. Everyone was talking wave 3 of (3) down even though those guys did not have good understanding of the Elliott Wave theory.

The problem is as long as the majority of market participants feel confident about one particular scenario it almost never materializes.

The market always follows the lest expected path…

Everyone pointed to similarity to 2008 crash. And yet the market refused to go down.

There is one technical flaw in that count, an extra higher high that was made on Dec 13th:

ES-mini Daily chart

That extra higher high made by a spike (see the red arrow on the cart above) left a ticking bomb under that straightforward bearish count.

I continue to argue that we should expect a more complex path to new lower lows. In this update I will outline two alternative scenarios.

(1) The Macro Triangle:

ES-mini, Daily

Under that “triangle” count we can see a couple of more moths of painful consolidation inside a triangle shaped wave (B) up. According to that count, during the following two months we may first test 3,600 and then come back up to 3,950 to test the red trend line. And that would be a huge decision point.

(2) The crazy strong short covering rally following GDX’21-’22 fractal.

There is a chance that we will get another crazy rally after two or three months of consolidation if ES follows the crazy complex fractal played out by GDX in Oct’21 – Apr’22:

GDX Daily chart

This is how we can apply that wave count to ES-mini Daily:

ES-mini Daily

As you can see there are two main turning points for both scenarios:

(1) I would expect ES -mini to make another leg down in subwave -c- or (c) down targeting 3,600 with potential drop to 3,500 undercutting the previously made low at 3,533 on Oct 13th, and

(2) I would then expect a bounce back up to the declining red trend line which ES can tag in 3,950 neighborhood.

The test of the red trend line would be the crossroad dividing two scenarios. Either ES will break over the red trend line and accelerate a rally or, conversely, fail to breakout, turn down and finally start a very strong aka 2008 type impulsive decline in wave (C) down.

Both scenarios can be considered short term bearish. For both scenarios the important resistance is 3,985. A push over that level would make those scenarios much less reliable.

Microwise if we switch to 15 min chart we can see that this rally can be considered a subwave c of wave -b- up to be followed by another decline in wave -c- down shown on the Daily chart above:

ES-mini, 15 min chart

Both scenarios can be considered short term bearish. For both scenarios the important resistance is 3,985. A push over that level would make those scenarios much less reliable.

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