$ES #ES-mini #trading setup
Overnight the bullish bounce that started on Tuesday afternoon extended to ne higher highs.
At 8-51 AM EST I shared with subscribers of my premium trading chat room expectations for upcoming decline into the Green Box:
“The rally extended overnight without any pullbacks and retraced 1/3 of the preceding five wave down move. To go long I would require the market to produce an a-b-c down move to the green box. Ideally upon break over a down trend line we should get a pullback to re-test that broken trend line from above.”
By 9-45 AM EST ES-mini dropped as expected and tagged the Green Box:
Note that price dropped down to re-test the red trend line that used to be a resistance and turned into a support. Here bulls had a great chance to stop the decline and produce a rally in the wave -c- up. But the drop continued:
By 11-19 AM ES sliced through the Green Box. Nevertheless I kept counting this decline as a corrective wave -b- down. The rational was:
“we are dealing with another structureless algo driven move. I never trust such moves because very often they turn into short lived swings.”
That same logic allowed me to correctly predict a bullish reversal on Tuesday afternoon and a bearish reversal on Wednesday morning. By 2-00 PM ES-mini retraced substantial part of the decline:
However, because bears managed to make a lower low in the morning I warmed subscribers of the premium chat room that this bounce would most likely make a lower high:
…”Now that lower low made today creates potential short setup. If this move up stops at 4,519-4520 that would be another bearish Running Flat structure.”
The afternoon rally in ES-mini topped at 4,516 at 2-45 PM, then bears turned ES down. ES dropped 30 points to 4,583 by close.
That was a super volatile day and only in a trading chat room it is possible to track different intraday scenarios.
Now let’s review potential scenarios for tomorrow.
Today ES-mini made another lower low and a lower high. At this point I do not see any bullish scenatio and I can outline two slightly different bearish scenarios (both has a micro i down, ii up setup).
Let’s look at the big picture on 240 min chart first:
I continue to expect this decline off the late July highs to find support in the Green Macro Demand Zone.
The current assumption is that the corrective wave -b- up was a shallow a-b-c shaped as a Running Flat structure. And bears got a chance to start that second leg down in the red wave -c- down.
The micro bearish path (i):
The micro bearish scenario (i) assumes that the red wave -b- up topped and the morning decline was a micro wave i down of a new five wave down move. Then this overnight bounce is a micro wave ii up that is setting the stage for a strong drop in a wave iii down triggered by the CPI release scheduled at 8-30 AM EST on Thursday morning.
The micro bearish path (ii):
I would say I like the second bearish count much more.
That scenario allows bulls to make one more push up to 4,913 – 4,920 in a subwave c of wave ii up setting up the stage for a strong decline in a wave iii down.
This is a potemtial path for a strong drop in a micro wave iii down:
To make that bearish setup much less probable bulls need to push ES-mini over 4,522.