The main question i whether wave ( A ) of ( 5 ), an impulsive rally that started in Dec’2018 has topped already or needs another push higher in subwave C of 5.
I have two different counts that give different answers to that question.
Let’s first start from my primary count which is a bullish one.
Under that bullish count the rally started in Dec’18 has not topped yet. It implies that the very final wave C of 5 started on August 6. That wave C of 5 will finally complete that large rally in wave ( A ) up. At the very minimum that rally has to tag 3,050 but it is more likely that it will stretch to 3,120 – 3,190.
The “Bearish” count below implies that a large rally in wave ( A ) up topped in July. Then the panic selling that bottomed on August 6 was the first leg down in subwave A of a large corrective wave ( B ) down. What I do not like about this count is that wave ( A ) up does not look completed because a rally from the low made on June 4 to the top in July does not have a-b-c structure and therefore can hardly be counted as the final wave 5 of ( A ) up.
On both charts above, either the bullish or the bearish count treated the low made by a panic selling on Monday, August 5 as an important low. The Bullish count treated that low as a major low from where another impulsive rally in wave C of 5 started. And the alternative bearish count treated that low as a temporary bottom from where we had to get wave B up to be structured as a corrective a-b-c up.
That is why I kept bullish bias after close on Monday, 8-5-2019. The previous week I kept counting micro waves in ES mini on 5 min chart to track that unfolding a-b-c up structure.
In both scenarios a completed a-b-c move up off the low made during overnight session on Monday, August 5th, should produce another move down. Under the bearish count we should get an impulsive drop in wave C of ( ) down targeting new lower lows under 2,775. And under the bullish count we should get a corrective decline that should make a higher low well over 2,775. Under the bullish scenario the a-b-c up structure ES played out last week can be counted as wave ( i ) up and as soon as it tops out we should get a corrective ave ( ii ) down. As you ca see on the chart of ES mini below, it can make the very final push higher in a micro subwave c of v that would complete that a-b-c structure. Many traders considered the spiky drop that bottomed during overnight session on August 5 as subwave iii down and, consequently, the rally that followed as a temporary pullback, a “dead cat” bounce. That is why those traders kept adding to the shorts during the last week. Technically speaking, that a-b-c rally we watched last week could be considered wave iv up if it stays under 2,945. If we get another push higher as shown on the ES 5 min chart below, that resistance will be most likely taken out. That would make bears cover their shorts and that final move up in a micro subwave c of 5 may come as a fast spiky move up targeting the red target box located in between 2,958 and 2,979. That would be ideal completion of a-b-c structure up and start of a bearish pullback.
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.