ES - it is easy to get lost in the middle of a corrective action
Yesterday I posted a new article on Medium blogging platform explaining that Wave Analysis works well in trending markets and is much less capable of accurately predicting the next move in corrective market. Let’s start with TVIX chart below because in general volatility gives us cleaner counts. The first conclusion is that TVIX has a short-term bearish look. Off the top made by a spiky wave A up ( topped at 27.00 on 8-6-2019 ) it has been in a messy correction move down. I count it as (w)-(x)-(y) pattern (see the red labels).
To complete that pattern it should decline in wave c of ( y ) of B down. And then it may produce another rally in a large wave C up (comparable in size to the first move up in wave A up ). That sets a bearish medium term bias for ES/SPX.
TVIX - 120 min updated at 2.29 AM on 8-29-2019
I can come up with many alternative counts for ES at this moment. Again, the reason for that heightened uncertainty is that we are in the middle of a corrective action where there is no any prevailing direction or underlying momentum. That count implies ES may stretch up to 2,975 – 3,000 to complete wave ( b ) of B up. And after that rally we may get another strong decline in a wave ( c ) of B down (that could be comparable in size to 200 point decline in wave ( a ) of B (see the blue labels). So expectation is that we should get another drop in wave ( c ) of B under 2,775 (the low made on 8-6-2019). But before that drop we need to complete the current wave ( b ) up of B down.
ES - 240 min chart updated at 2-25 AM on 8-29-2019
Wave b is the least predictable wave. And in wave ( b ) of B uncertainty reaches its maximum level. That is why I have so many alternative path for completion of that wave wave ( b ) of B up.
If you look at the 45 min chart below you can see two slightly different micro paths that both imply wave ( b ) up is shaped as a triangle. The main difference between this 45 min chart below and 240 min chart above is how high ES can get before another bigger move down. I do not like that triangle count much for several reasons. First, in a triangle at least one wave has to be 0.618 of preceding wave and each wave shall be shorter than a preceding one. But in this case ave ( d ) down is longer than wave ( b ). That is technically incorrect! Moreover, wave ( d ) down broke under the low made by wave ( b ). Finally, neither wave ( c ), nor wave ( d ) does have a required a-b-c structure. So this triangle is seriously flawed! But crowds of traders who do not pay attention to details will consider that formation a triangle. That is important because they will short that Red Box assuming completion of that fractal. But “surprisingly” price may slice through the Red Target box under the scenario shown on 240 min chart. That will run numerous stops and may push ES into the Red Target Box on 240 min chart. ############### TECHNICAL ANNOUNCEMENT ########### I will be flying over the pond to the US today. My plane is scheduled to take off at 9.00 AM EST and I hope to get home at 9 PM EST. However, I do plan to get on-line and keep updating you during the flight. Last time it did not work with Finnair but this time I will be flying a newer Boeing 787 and I hope the internet will be working!
ES - 45 min chart updated at 2-25 AM on 8-29-2019
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