$ES: Three “Spaghetti” Models

  • CastAwayTrader
  • September 19, 2023
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$ES #ES-mini #trading setup #Elliott Wave

Meteorologists use the term “spaghetti models” to show different paths for the cone of a hurricane. Its just a good way to visualize results of multi scenario analysis.

Let’s start from the big picture:

ES-mini 240 min chart

The big picture is pretty clear. Everyone in the market watches that huge bearish reversal Head and Shoulders pattern. However, the fact that everyone sees it does not guarantee that this pattern will play as the majority expects. In 50% of cases a Head and Shoulders pattern gets invalidated that becomes a long signal. Again, the invalidation of a bearish reversal pattern always triggers a short covering rally.

To invalidate the bearish reversal Head and Shoulders pattern and trigger a short covering rally bulls need to push ES back over the Red Supply zone.

To trigger the bearish H&S structure bears need to push ES under the neckline 4,415.

Everything what happens in between 4,540 and 4,415 is just a meaningless noise.

That slow leaking move down together with bullish seasonality for the second part of September makes me closely watch that bullish setup:

S&P 500 cash index , 30 min chart

I added the dotted red trend line to the chart shown above and any move up over that red trend line would be a strong argument in favor of that bullish scenario.

A 30 min chart of ES-mini futures has a very similar picture:

ES-mini 30 min chart

I really would like bears to make one more push lower today to tag at least a 76.4% ext of the wave a down = 4,478.50 for ES-mini and 4,428.33 for SPX.

That would fulfill minimum requirements for a wave c in any a-b-c structure.

That push down would make at least a temporary low. Then we can get a spiky move up on FOMC announcement (scheduled at 2-00 PM EST on Wednesday) back into the red supply zone. And the shape and depth of that move up would tell us if the bearish count survives or gets invalidated and the bullish alt count gets triggered.

ES-mini 30 min chart, “spaghetti” models

I think any move over the upper edge of the red supply zone (4,543) would be a strong argument in favor of the bullish scenario.

In all three scenarios I would expect ES/SPX to make a lower low and then produce at least a deep bounce retracing 50% of the decline off the Sep 1 high.

Under the bullish black path bulls need to reclaim 4,543 resistance and then produce a bullish flat a-b-c consolidation over that broken resistance. That would be a long setup to ride an accelerated rally.

Can bulls start pushing ES-mini / SPX up today WITHOUT making a lower low?

Yes, they can. From time to time the market ignores that guidance of a minimum size of wave c to be at least a 76.4% ext of subwave A. But that would be a shaking unstable ground for a new rally. I call that shortened wave C a ticking bomb. More often than not the market fails to start a new rally based on such imperfectly completed a-b-c down structure and comes back down to make a lower low after a failure to start a rally.

It’s barely possible to predict what the market will do next. The future market move is totally out of OUR CONTROL. But what is in OUR CONTROL is making decision whether some chart resemles a repeating pattern and whether it makes sense to bet money on that chart. To bet money on the move up back into the red supply zone we need ES/SPX to make a lower low.

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