$ES: Will It Bounce off the Fresh Monthly Support?

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#es-mini #trading setup #Elliott Wave #Monthly Opening Range #weekend update

The Weekend Update Part I.

ES-mini futures managed to close a day UNDER the monthly support for August:

The trading range formed during the first three full trading days of a month should be considered the Month Opening Range. The lowest price traded during these three trading days is the Monthly support. The highest price traded during these three trading days is the Monthly resistance.

Read my blog post explaining the Month Opening Range in details.

I saw numerous cases where price would make a fake breakdown on the 4th trading day of a month only to come back inside the range.

The Month Opening Range strategy is straightforward:

  • if bears break under the monthly support chances are they will keep pushing to new lows until the mid month, but
  • if bulls manage to reclaim the monthly support, chances are we will see a very strong move up targeting the monthly resistance.

ES-mini closed slightly under the Monthly Support on Friday. The Sunday-Monday action will define which of those two very different paths will be in play.

Let me show you a couple of examples to convince you that this Month Opening Range strategy is actually a powerful trading tool that takes advantage of frequently repeated pattern:

Note that the failed breakdown in early July 2023 triggered a huge rally.

In May 2023 another bulls played another rally triggered by a failed breakdown under the green Monthly Support:

April 2023 is another similar case where a failed attempt of bears to break under the green Monthly Support early in the month was followed by a strong rally:

Here you can see one repeating pattern: in an up trending market price tends to top at the end of a month and then we get a two – three day countertrend move at the beginning of a new month.

A trading range of the first three trading days form the Month Opening Range.

The first real test of a freshly formed Month Opening Range comes on the 4th – 5th trading days of a month.

If bears fail to break under the lowest price reached by a countertrend move produced by bears during the first three trading days bulls come back and quickly push price all the way up to the highest price formed during the first three trading days.

Note how ES-mini peaked at the end of October 2022, produced a corrective countertrend move during the first three trading days of November:

Bears produced a three day move down but on the forth trading day of a new month bears gave up. Bulls stepped in and started a new leg up. This is a repeating pattern for an up trending market.

That same principle inversely applies to bear markets:

Note that when ES-mini was trending down in 2022 price made the lowest level on the last trading day of September. When price keeps going down and reaches the lowest point at the end of a month we expect a countertrend move during the first three trading days of a new months. In the first three trading days of October 2022 brought a strong countertrend rally.

See what happened next. Suddenly on the 4th trading day of a month bulls lost their power, bears stepped in and made a strong push down.

What is is the first target? The monthly support, the low made during the first three trading days of a month.

And here is an almost identical example from April – May 2022:

Again, on the 4th trading day of May bulls lost their power, bears stepped and quickly pushed price back down to the Monthly Support.

That frequently repeating pattern make me cautious about expecting an immediate breakdown under the Friday lows. A BREAKDOWN is possible. But according to this pattern bulls still have good chances to turn the market up. Friday was the 4th trading day of August. Let’s see if bears show they hand on Sunday – Monday. If suddenly we do not see down pressure and price reclaims the Monthly support 4,505.75 on Monday we should be ready for a strong revenge rally or at least for a bounce up to 4,535.

In the part II of the Weekend report I will share a possible path where a small bounce off the Monthly Support would provide bears with a sweet setup to ride a 130-150 point decline.

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