Earlier today I was looking for a counter trend rally to correct the decline between 133775 and 1251 in the front month contract. What started off looking like a triangle w.b quickly soured into another substantial decline after the EU Energy Commission said that the Japanese nuclear situation was out of control. The two charts above reflect what did and didn't happen.
What can be drawn from these charts is that the market doesn't care what I think and it trades to a point where the most pain can be inflicted upon traders. That point was below the nest of stops at 1251 where dip buyers stepped up to the plate in hopes that the "buying the dips" mentality was gonna work forever. So naturally, when US Energy Secretary said that they believe a 'Partial Meltdown' Occurred in Japan... the market was driven down by the shorts, triggering stops then they bought all those sell stops and the market closed at 1255.
THE BULLISH CASE
As of today, odds are that the alternative count (a triangle w.(b) ) can be eliminated due to the depth and slope of the decline from 1323.50 on the daily chart of ES1-057. However, as cynical as this will sound, I know this market is manipulated. I am seeking confirmation that an even a more bullish interpretation can be extinguished. When this happens, there's gonna be plenty of downside to this market. So before I reveal my bearish count, allow me some latitude to share the alternative view.
This count assumes that the rally from 672 is a correction within a bear market rally. As it stands, this count will be eliminated when price trades one tick below 122450 as what is now labeled w.4 can't enter the territory of w.1 according to the rules and guidelines of the wave principle. But a word of caution, fourth waves usually find support from the base channel that can be established between the first and second waves. As of the close, the market has reached that channel. So at least be on guard for this possibility that a new recovery high can still not be eliminated.
THE BEARISH CASE
The decline from 1343 in the daily continuous contract counts best as a three wave structure. Therefore another up, down would be required to officially label the chart as a five wave structure. As we learned today, bear market rallies can also be shallow so look for any three wave rally to end between the typical Fibonacci retracements associated with fourth waves (.236, .382 and .50). Personally, I think the market will test the lower channel line before a final round of selling to complete w.1. Targets for the termination of w.1 assume that any corrective w.iv will reach the .382 retracement. Any print above 1292.5 negates the bearish view as w.iv can't enter into the territory of w.i.
Bottom line - we know what key levels render each view incorrect.
I hope you found this information helpful and .,,,
Best of Trading
Market up in ON Session as expected under either scenario. Watch key levels.
ReplyDeleteIn the bearish case, how large do you think would be the bounce after the market completes w1 at 1192-1202 ?
ReplyDeleteTypically 2nd waves retrace .6.18 however the only stipulated rule is that a 2nd wave can't retrace more than the origin of wave 1.
ReplyDelete