$ES #ES-mini #trading setup #extension #wave 3 down #Elliott Wave
Yesterday ES-mini broken under an important support 4,462 and that triggered a breakdown scenario.
There are three key ideas behind that wave count / scenario.
First, we are getting an A-B-C move down off the high made in late July 2023.
Second, the second leg down in a wave C down tends to follow a five wave down structure.
This acceleration in the move down is the hallmark of a wave ( iii ) down.
In any five wave down structure the main uncertainty is where the strongest part of the decline, its wave (iii) down may bottom.
The usual suspects are:
- 138.2% ext of a wave ( i ) down – for weak wave C down; and
- 176.4% ext of a wave ( i ) down – for a normal wave C down (4,365 in this case); and
- 223.6% ext of a wave ( i ) down – for a strong wave C down (4,312 in this case).
Today ES-mini stopped on a tight confluence of several important levels:
- 200 Day moving average; and
- 41.4% retracement of the preceding five wave up rally; and
- 176.4% ext of the wave ( i ) down.
That cluster of support levels is strong enough to stop a normal wave ( iii ) down.
The EMA 21 Weekly calculated based on lows is located at 4,391.
My base case scenario is that bulls will try to close a week tomorrow OVER or at that level.
However, even in the best case for bulls a potential move up would only be a temporary corrective bunce in a wave ( iv ) up to be followed by another push lower in micro wave ( v ) down.
( 1 ) So the base case scenario argues that either wave ( iii ) down bottomed to day or makes a slightly lower low overnight but recover overnight and open higher tomorrow morning.
In that less bearish case case we can get an a-b-c pullback in a wave ( iv ) up to 4,409 – 4,424. Then we will get another leg down in the final wave ( v ) targeting 4,312.
There are several reasons why 4,312 can be considered a rock solid support:
(i) its a 100% ext of the wave A down.
(ii) its 50% retracement of the preceding five wave move up.
(iii) its a 500 Day moving Average
(iv) its where a declining black trendline connecting the Jun’23 high and Aug’23 low is located.
( 2 ) The Very Bearish scenario argues that 4,312 is where only wave ( iii ) down will bottom.
Remember, fighting a wave ( iii ) is the WORST TRADING SETUP. The problem is that wave ( iii ) tends to exteeeeeeeeend.
(i) the Thursday decline stopped at a confluence of numerous important levels of support; and
(ii) the base case scenario is that we get a bounce tomorrow. We can easily see ES re-testing 4,404-4,409. It is questinable if bulls will be able to push ES higher to test 4,424.
( iii ) under the base case scenario the final wave (v) down will bottom around 4,312.
(iv) under the very bearish scenario wave (iii) down will keep extending lower with very shallow pullback down to 4,312.
Even in that very bearish case upon completion of the decline in wave (iii) down at 4,312 we will most likely get a corrective bounce to 4,400sh in a wave (iv) up.