$ES #ES-mini futures #trading setup
In my previous update I argued that bulls had a setup to push up to 4,200. They started the rally and managed to push ES up to 4,189 on Friday. Then another push down started.
This is how a Macro picture looks like:
On the chart above you can see that I consider that choppy consolidation off the low made in June 2022 (labelled (A)) as a large and complex corrective wave (B) up.
That large wave (B) up is composed of three waves labelled as W up, X down, Y up.
We may be in the final innings of that corrective game. To complete the (a) up, (b) down, (c) up micro structure of the wave Y up bulls need to make a nominal new higher high over subwave (a) up and hit the minimum extension 66.7% of (a) = 4,240.
There is a macro resistance level located at 4,223. That is the 50% retracement of the whole decline off the Jan’22 top. In RTY the 50% retracement of the rally from the pandemic low made in March 202 to the top made in Nov 2021 nailed the bottoms made in June and October 2022.
In RTY the 50% retracement of the rally from the pandemic low mad in March 2020 to the top made in Nov 2021 nailed the bottoms made in June and October 2022. Millions of traders are trained and myriads of algos are coded to reject that 50% retracement fib.
There are two alternative ways how to count the top of the a-b-c move up off the March 2023 low.
Bears will consider a push up to 4,220 -4,240 as completion of the whole (a) up, (b) down, (c) up corrective structure off the October 2022 low. That means bears have arguments to believe one more push up would complete the large corrective W up, X down, C up structure off the major low made in June 2022. Therefore, bears will be expecting a new large leg up targeting 3,300 – 3,000.
In contrast, Bulls will agree that a spiky move up to 4,220-4,240 will make a top but only a temporary top.
Bulls may argue that ES should re-play the -a-b-c- up structure of the rally off the Oct 20-22 low into the high made in early Dec 2022:
ES-mini is in a wave (c) up of that (a)-(b)-(c) structure. And the move up off teh March 2023 low resembles the micro a-b-c structure off the first leg up off the Oct 2022 low:
In an (a)-(b)-(c) up structure, the final subwave (c) may be as short as 66.7% of wave (a) (the bearish count). But it tends to get at least equal to the first wave (a) up. The 100% ext of the wave (a) up is located at 4,440. That extension fib is aligned with a macro resistance of the 66.7% retracement fib 4,443.
But price most likely will not be able to keep stretching there and would rather follow the same -a- up, -b- down, -c- up structure (see the black labels) similar to the same -a-b-c- up structure of the rally from Oct 2022 low to the Dec 2022 high (see the previous chart).
both, the macro bearish and the macro bullish scenarios allow bulls to make a push to 4,220 – 4,240.
Both scenarios argue for a move down that would follow that spiky move up to the macro resistance.
The structure of the decline would help us to prioritize between the macro bullish and macro bearish scenarios describe above.