S&P - Weekly Report - two main macro scenarios

My long term count remains unchanged.
The top made at 3,393.52 on Feb 2019 looks like the top of a macro wave ( 3 ) up in the Five Wave up fractal started in 2009.
Off that top S&P was expected to start a large corrective wave ( 4 ) down that is normally structured as (A)-(B)-(C) down.
Wave ( 4 ) down normally retraces from 41.4% to 50% or even 66.7% of the preceding rally in wave ( 3 ) up.
That sharp drop that bottomed at 2,191.86 retraced 50% of the preceding rally.
In terms of the depth of the correction that drop satisfied criteria for depth of the pullback in wave ( 4 ) down.
However, that drop did not have an (A)-(B)-(C) internal structure.
That drop is better counted as subwave ( A ) of wave ( 4 ) down, the first leg of the decline in wave ( 4 ) down.
The subsequent rally that started off the mid March 2020 lows could be counted as a corrective subwave ( B ) up.
That count suggests another decline in subwave ( C ) of wave ( 4 ) down.

S&P 500 index - daily chart updated on 7-17-2020 (primary "Bearish" count )

Nasdaq Composite can be counted in the identical way.
In case of Nasdaq this rally managed to make a higher high over the previous top reached in Feb 2020.
However, that higher high can not be considered as invalidation to that count.
In strong bullish trends a corrective subwave ( B ) u of wave ( 4 ) down may make a higher high.
That type of internal structure of wave ( 4 ) down where subwave ( B ) up manages to make a higher high is called the Expanded Flat or Running Flat structure.

Nasdaq Composite index - daily chart updated on 7-17-2020 (primary "Bearish" count )

The Alternative Bullish count of S&P 500 has the same starting point as the bearish one. Both, the bearish and the alternative bullish  counts consider the top made in Feb 2020 as the major top made by a macro wave ( 3 ) up in the Five wave up fractal that started off the 2009 lows.
But the bullish count considers the sharp drop from the Feb 2020 top to mid March 2020 bottom as a completed corrective wave ( 4 ) down.
Under the bullish count off the bottom of wave ( 4 ) down made in mid March 2020 ES had to raly in an impulsive fashion in subwave ( A ) of wave ( 5 ) up.
When we count that rally in an impulsive way again we can identify two slightly different alternatives.
The first alternative is shown on S&P 500 Daily chart above.
It counts the previous pullback that bottomed at 2,965.66 on June 15th as wave ( iv ) down to be followed by the final wave ( v ) up that may stretch to the previous top made in Feb 2002.

S&P 500 index - daily chart updated on 7-17-2020 (primary "alt Bullish 1" count )

However, there is a slightly different micro count of the rally in that subwave ( A ) of wave ( 5 ) up. I call it Alternative Bullish count 2 (see the chart below).
That Alt Bullish count / 2 does not consider the previous pullback that bottomed at 2,965.66 on June 15th as wave ( iv ) down but rather as its subwave ( a ) down.
To complete wave ( iv ) down ES needs to push one more time in subwave ( c ) of wave ( iv ) down.
Then wave ( v ) up would bring price back to the top made in Feb 2020.
That would complete subwave ( A ) of wave ( 5 ) up.
And after the Double Top pattern ES may play a bigger A-B-C down pullback that may retrace 50-66.7% – 76.4% of the rally that started in the mid March 2020.

S&P 500 index - daily chart updated on 7-17-2020 (primary "alt Bullish 2" count )

Let’s make some conclusions:

1. Under the Primary Bearish count ES is setting up for a large drop that may take several months and target 2,000 – 1,850.

2. Under the Alt Bullish count 1 and Alt Bullish Count 2 ES will retrace substantial part of the rally that started in mid March 2020 but will not make a lower low under mid March 2020 lows. The pullback may retrace from 50% to 76.4% of that rally. And that pullback in subwave ( B ) of wave ( 5 ) up would be followed by another strong impulsive rally in the final subwave ( C ) of wave ( 5 ) up that has to make a new all time high.

3. Both, the Alt Bullish count 1 and Alt Bullish Count 2 expect ES to stretch higher to the previous top made at 3,395 in Feb 2020. Subwave ( A ) of wave ( 5 ) up normally stalls at the top made by the previous impulsive wave ( 3 ) up.

4. The main difference between the Alt Bullish count 1 and the Alt Bullish Count 2 ES is whether ES will keep pushing higher to 3,400 or will first get a corrective pullback to 2,930 – 2,880 in subwave ( c ) f wave ( iv ) down.

Trading is risky. Read this important Disclaimer

HIGH RISK WARNING
Trading stocks, options, or futures carries a high level of risk, and may not be suitable for all investors. Before deciding to trade, you should carefully consider your objectives, financial situation, needs and level of experience. CastAway Trader LLC provides general overview of trading methods that does not take into account your objectives, financial situation or needs. The content of this website must not be construed as personal advice. The possibility exists that you could sustain a loss in excess of your deposited funds and therefore, you should not speculate with capital that you cannot afford to lose. You should be aware of all the risks associated with trading. You should seek advice from an independent financial advisor. Past performance is not necessarily indicative of future success.

Previous posts:

© 2019-2020 CastAway Trader LLC. All Rights reserved.

Login