$ES $NQ: MACRO UPDATE: Two Bearish Scenarios

  • CastAwayTrader
  • November 5, 2023
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$NQ $ES #ES-mini #trading setup #Elliott Wave

I do not see any macro bullish scenario. I consider this short covering rally as a corrective bounce. I expect that bounce to top making a lower high.

Let’s review two main scenarios I will be watching:

The SCENARIO 1: Bearish: Running Flat pullback:

NQ-mini Daily chart

I can not find any other way to count that crazy whipsaw as a corrective wave (ii) up where the wild rally we got last week is a subwave (c) up.

Under the Running Flat structure the subwave (c) of wave (ii) up corrective wave (ii) up is supposed to make a lower high:

NQ-mini Daily

This is how that scenario looks like on ES-mini chart:

ES-mini 120 min chart

Under the bearish Running Flat structure bulls will not be able to get over 4,400 and bears should start a new leg down off the Red Demand zone.

(II) Scenario 2: EXPANDED FLAT: Alternative and the most painful structure in this case would be the Expanded Flat correction:

NQ-mini Daily chart

Under that painful scenario (2) “Expanded flat structure” bulls will be able to push NQ up to 15,663.

This is how that scenario looks like on ES-mini charts:

ES-mini 120 min chart

The Expanded Flat is the is the most painful type of a corrective pattern because:

  • subwave (b) up breaks under the low of wave (i) down creating a bear trap. It looks and feels like a start of a wave (iii) down; and
  • the deceiving drop in a wave (b) down that makes a lower low is followed by a heartbreaking non-stop short covering rally that keeps pushing higher until it breaks over the high of the previous rally in a subwave (a) of wave (ii) up, and
  • the final rally in a subwave (c) up washes away all bears and makes sure all shorts are closed before another strong leg down finally starts.

This is a micro path that leads to the target 4,460 allowed by the most painful Expanded Flat structure:

ES-mini tick bar chart

In conclusion:

if bears fail to start a strong decline off the highs made on Friday and instead we get a corrective flat a-b-c pullback consolidation, bulls will be able to make one more push higher to violate the highs made in mid Oct’23.

That final rally would set up a bulls trap and set the stage for a brutal rejection triggering the failed breakout short setup.

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