Let’s start our weekend review from a big picture view.
The primary count considers the high made at 3,375.75 in Feb 2020 as the top of a macro wave ( 3 ) up.
Off that top we should expect a corrective pullback in wave ( 4 ) down.
It should be structured as ( A ) down, ( B ) up, ( C ) down.
The first quick drop into the low made at 2,163.50 in mid March may be counted as subwave ( A ) down.
Then the rally that followed should be counted as subwave ( B ) up.
To complete wave ( 4 ) down needs another push lower where the final subwave ( c ) down is supposed to make a new lower low under the low made in March 2020 (see the Green Demand Zone 2,085 – 1,790).
The drop off the Feb 2020 has a clean A-B-C structure.
The subsequent pullback into June 2020 high may also be counted as A-B-C but C does not have a clean micro structure.
The good sign that the whole move up off the mid March lows topped right at 85.45 retracement of the decline in wave ( A ) down.(edited)
Any corrective wave B normally does not offer a clean micro structure making it difficult to pinpoint the exact point of its completion.
This rally that looks having topped in June 2020 was not an exception.
The only more or less reliable way to confirm the topping process of that corrective rally is to wait until the very first move down violates a meaningful support.
I watched a critical micro support at 2,981.50.
The first drop did not violate it on June 12th.
But in the following two days that support was broken.
The count I watched back then could have delivered one more push to a higher high if that support did hold.
Violation of that support let me conclude that the high made at 3,220.75 was a significant top regardless of a count we apply.
In my Sunday report posted two weeks ago I explained the bearish scenario that expected another leg down in subwave ( C ) of wave ( 4 ) down composed of five waves. Any Five Wave structure either up or down starts slowly from a relatively shallow 1 – 2 structure.
This is how that count looks like on the actual ES 240 min chart below.
That count suggests an immediate drop towards 2,930 – 2,900 in a micro wave iii down of ( c ) of ( i ) down.
Again, any five wave down structure starts from ( i ) down – ( ii ) up structure.
And we may be watching unfolding subwave ( c ) of the wave ( i ) down.
That subwave ( c ) of wave ( i ) down may find solid support at the upper Green Demand zone 2,835 – 2,815.
I would not expect subwave ( C ) of wave ( 4 ) down to be as fearful and quick as the first drop into March 2020 low.(edited)
Normally subwave ( C ) of wave ( 4 ) down may take much more time than the first leg down in subwave ( A ) and corrective bounce in subwave ( B ) up that follows it.
It may take months for subwave ( C ) down to complete its five waves down.
The goal of subwave ( C ) to convince even the most long standing bulls that a new bear market has finally begun.
ALTERNATIVE “BULLISH” MACRO COUNT
And the rally that followed then is the first leg of wave ( 5 ) up.
Normally subwave ( B ) down of wave ( 5 ) up strat from a relatively shallow move down in -A- down followed by a pullback in subwave -B- up retesting the previous top made by wave ( A ) of ( 5 ) or even making a higher high. At this point the bullish momentum is very strong and even a corrective subwave -B- up of wave ( b ) down can easily make a higher high.(edited)
We have the very same uncertainty about the micro count of that subwave b up as we discussed in connection to the Primary Bullish count.
I mean we can not be sure if subwave B up has topped or still may make another push higher.
ES 240 min – “Alternative Bullish Count” – Micro Variation
Again, here we need to note two considerations.
If at the opening of this Sunday evening trading session ES opens without a strong drop under 3,000 that would increase probability for that alternative count.
This Micro Variation count is based on common structure of a corrective wave B. In the vast majority of cases it is structured as (a)-(b)-(c).
As you can see the pullback up off the low made by wave A down at 2,923.75 on June 15 looks like a monowave, a straight move up (labelled as (a).
That is a good candidate for subwave (a) up of wave B up but not the whole wave B up.
Both, the Alternative Bullish count and the the Primary Bearish count consider the last high made by ES at 3,220.75 on June 8th as a significant top.
Under the Alternative Bullish count off that top Es should play an A-B-C down pullback where the final subwave C down comes as a sharp drop.
That subwave C down may dive to 2,500 setting extreme level of fear among investors and traders alike.
That A-B-C down concluding with a straight drop would be a great long setup because it sets a stage for another multi month rally in subwave ( C ) of wave ( 5 ) up.
Despite we face uncertainty as to what count, the bullish or bearish, will eventually prevail, we can note that both counts expect a significant decline from the current levels.
In the most bullish case ES may quickly drop to 2,800 – 2,500.
In the worst case bearish scenario ES will keep leaking lower for months until it at least re-tests the mid March lows.
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