In January – February 2021 I have been posting charts that suggested an upcoming turn down.
The structure of the rally that started in March 2020 looked like a completed (A)-(B)-(C) up structure of the final wave ( 5 ). But the move structure of this move down looks corrective. That makes me consider a scenario where bulls will be able to produce another push higher after this decline finds its bottom.
Now let’s focus on the wave count shown below.
First note that ES is testing the trendline that has been supporting that rally since March 2020.
Second we should note that bears broke under 20 SMA and the next strong support may come at the Green Demand channel located around 3,650.
If to speak about wave count itself I do not like it because of elongated subwave (c) of ( v ).
Not only it is longer than wave ( iii ) but that final stretch higher labellesd as ( c ) of ( v ) with shallow pullbacks in fact looks like subwave ( c ) of wave ( iii ) up.
Let’s re-label this chart and see if an alternative wave count would make more sense.
That count really makes more sense for a number of reasons:
– subwave ( a ) of wave ( iii ) up stopped at 138.2% ext (new classic),
– subwave ( c ) of wave ( iii ) stopped at the “magic” 223.6% ext of wave ( i ) up ( the textbook);
– subwave (c) of wave ( iii ) is slightly longer than subwave ( a ) of wave ( iii ) up, it stretched almost to 123.6% ext of subwave ( a ) up.
If the recent top made by ES at 3,959.25 was only wave ( iii ) up then this decline is wave ( iv ) down that tends to find bottom slightly over the low made by wave -iv- down of one degree lower, the low made by the previous pullback.
That wave -iv- down bottomed at 3,656.50 on Feb 1, 2021
That target is where the upward sloped Green Channel is currently located.
Lets now discuss what way bears may take to het to that 3,650 target.
To do that we will zoom-in to 60 min chart shown below.
This is how that count looks like on 15 min chart (see below).
As you can see, if the previous top made by ES at 3,912 on March 1st was wave (X) then ES is supposed to decline in (a)-(b)-(c) down structure.
And the strong decline we got on Wednesday is only wave ( a ) down.
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