$ES #ES-mini #trading setup
Yesterday a member of my chat room asked me if that rally could be a corrective wave (b) up. I do think that it really looks like a corrective squeeze. The rally off the low made in October 2023 lacks an impulsive structure. That move did not produce any pullbacks and now looks like a straight line. That is the main distinctive feature of corrective rallies:
If the October 2023 low was the bottom of the corrective subwave (b) of wave (iii) up, then this rally should have been the strongest part of a rally in the subwave (c) of wave ( iii ) up.
But the subwave (c) of wave (iii) in majority of cases has a clean five wave subdivision. That means it starts from a micro i up, ii down setup. Now look at the rally in the yellow box. This rally did not have any i up, ii down setup.
Moreover, that rally is a way too large for a micro wave -i- up
Those consideration brings to the table a very tricky scenario where this rally is a subwave -b- up inside a corrective -a- down (bottomed in Oct 23), -b- up (can top in Jan’24), -c- down structure shaped as the Running Flat structure.
Because this rally made a higher high the move down in a wave -c- down may not be able to make a lower low:
So, I thin, that this rally is a premature start of the strongest part of the rally in a subwave (c) of wave (iii) up. I would expect a drop in a subwave -c- down that would complete a corrective wave (b) down (see the Green Box).
The main problem with the Running Flat scenario is that its barely possible to predict where this wave -b- up can top. It has already overshot the starting point of the wave -a- down.
But it can stretch higher to test the All Time High made in Jan’22 = 4,808.25.
In the most extreme case this rally may extend up to a negative -138.2% ext = 4,947.
The key level of support is 4,736, the July high. Bears need to push ES-mini back under that support to confirm the rally has topped.
If bears fail to break under that level you may expect bulls to push it higher to make a new all time high over 4,808.