ES - where that panic drop may find good support
This drop under the previous low made by subwave b down made at 3,305.50 on 2-09-2020 is the first solid confirmation that wave ( iii ) up has topped.
The ideal minimum target for wave ( iv ) down is the low made by wave iv down of one degree lower at 3,212.75 on 1-31-2020.
However, we should not expect a direct drop to that ideal 3,220 level.
In majority of cases wave ( iv ) down is structured as (a)-(b)-(c).
And we are still dealing with the first leg down in subwave ( a ) .
Here it may be too late to short. At least I do not see a good short setup.
A good shorting setup could be produced by a corrective pullback in subwave ( b ) up.
That “dead cat bounce” may retrace form 33.3 to 61.8% of the first leg down in the current subwave ( a ) down.
ES - 240 min chart updated at 6-18 PM on 2-23-2020
This drop is the sixth sharp drop for the last 2 months.
The previous five ones resulted in strong pullbacks.
The previous drop stopped at 200 MA (the double magenta line) on 60 min chart.
That was a minor wave iv down.
That double magenta line should provide strong support for the market again.
But very often market overshoots 200 MA.
On Jan 31st ES overshot that support by 13 points but then quickly recovered.
ES - 30 min chart updated at 6-27 PM on 2-23-2020
Ideally I would love ES to overshoot that support by 20 points and tag 23.6% retracement of wave ( iii ) at 3,272 . That would make a speculative long setup at least for retest for that 200 MA from below.
We can consider that drop as a micro a-b-c structure where c extended to 276.4% of a down.
The classic extension is 223.6%. But sometimes it gets stretched to 276.4% ext or even 323.6% ext
It’s important that 323.6% ext returns 3,275.25, a level very close to 23.6% retracement of wave ( iii ) down at 3,272.
Finally, 50 Day Moving Average is currently located at 3,278.50. That is another fib supporting that confluence that should work as a strong support for that decline.
ES - 60 min chart updated at 7-35 PM on 2-23-2020
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