ES: Update of the Two Bearish Scenarios

  • CastAwayTrader
  • February 23, 2023
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$ES #ES-mini futures #trading setup

Let’s start form a macro update.

We assume that the large corrective subwave Y of a wave (B) up topped in early February 2023. Off that top we should get a large wave down to a new lower low. What we do not know at the moment and can only guess what specific path the price will be following. It is possible that it will go down in an impulsive five wave down structure. But I assign low probability to that scenario.

More likely is that we will get a complex combination of several (a)(b)(c) moves down.

That February decline could be an unfolding subwave (a) down.

Another important observation that we should make on that daily chart is that ES found support at a confluence of

(i) the pink 200 MA Daily, and

(ii) the red down trendline that use to work a resistance but now turned into a support

ES-mini Daily chart

The most bearish scenario is that ES bottomed in a subwave -a- of wave -iii- down and has been consolidating in a shallow corrective subwave -b- up of wave -iii- down:

ES-mini, Daily chart

Let’s zoom-in to 240 min timeframe:

ES-mini, 240 min chart

That scenario assumes that ES-mini has already bottomed in subwave -a- of wave -iii- down and has been consolidating in an a-b-c up structure of a corrective subwave -b- down. Upon completion of that move up in subwave c of subwave -b- up of wave -iii- down we should get a very strong decline i subwave -c- of wave -iii- down.

(2) Another alternative scenario assumes that ES-mini has not bottomed in that leg down yet and can do that tomorrow:

ES-mini, 15 min chart

As you can see, we have a cloud of extensions pointing down to 3,930-3,920 area. This is where a subwave -a- of wave -iii- down may find support. If we get that extension lower tomorrow, then I would expect another large a-b-c up shaped consolidation in subwave -b- up of wave -iii- down targeting 4,050-4,060.

The main problem for bears is that SPX dropped into confluence of important support levels on weekly timeframe:

S&P weekly chart

Note that SPX bounced off the 21 EMA weekly (blue line). It closed right at the green 50 MA weekly.

According to my MTF Cycle Trader Indicator for TradingView, SPY got really oversold on daily:

We can get another very volatile day tomorrow caused by release of CPE data at 8-30 AM EST.

⚠️ a drop down to 3,935-3,930 would be an attractive area to go long.

⚠️ a spike to 4,060 would be an attractive area to go short.

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