ES Morning Update May 4th 2017

Looks like we finally got our breakout over the falling green trendline last night and have fell back to retest it this morning.  I said yesterday in the chatroom that the MACD’s on the 6 hour chart were looking ready to turn back up and the ideally scenario would be for them to curl up slightly and then flatten back out… and that’s just what they have done.  I’m sure it’s because of this 60 minute MACD becoming overbought and rolling over for this backtest on the falling green trendline.  It’s too early yet to know if this move up from yesterday’s low is some type of B wave (one straight wave up) with a C wave down yet to come, or if it will breakdown into a smaller (abc) B wave up.  But it certainly looks like we had some degree of an ABC wave down from the 4/26 high to yesterday’s low.  I don’t know if that whole move was just a big A wave with the 4/26 top marking the completion of the of the whole move up from the 3/27 low or we are still in that rally up?

So… scenario one is that the 3/27 bottom up to the 4/26 high was a big ABC up that is finished and 4/26 to the 5/3 low was the first A down in the next set of waves.  This count is probably unlikely as the market tends to move up in series of 5 waves more often then just 3 waves (ABC’s) and down more in 3 wave patterns.  And that suggests scenario two is more likely, which is that the move up from 3/27 to 4/26 was just 3 waves of 5 waves in total and the sideways to slightly down move from 4/26 to 5/3 was wave 4… leaving us in wave 5 up right now.  This goes better with my thinking that we’ll double top or slightly pierce the all time high from March 1st and end the 5th wave up.  So again, I’m still looking for that to happen and would expect to see 5-10 points over that high as the end of the move.  If it gets beyond 2315 that 5th wave up could extend and extend with shorts getting squeezed as they keep shorting it all the way up to 2480 or so.  Meaning I’m a bear between 2395 and about 2410 but after 2315 I’d exit and consider a long.

Back to this possible 5th wave (yes, it could be the B wave up with the 3/26 rally ending at the 4/26 top, but lets assume this bull wants more), if today we see some consolation along that falling green trendline, and/or a slight pierce of it (but not lower then yesterday’s low) then it the move up from yesterday to the high afterhours could be some kind of “a wave” up inside that 5th wave.  Then a “b wave” down today would leave tomorrow mornings’ Job Report (Non-Farm Payroll renamed to “Employment Situation”) open for a “c wave” up to end that 5th wave.  If this move happens today it will also make an “inverted head and shoulder’s” pattern with yesterday’s low being the head and the left should back on 4/28-5/1… which again suggests a “c wave” up yet to come, and it’s likely inside a bigger wave 5 up that should complete this whole move up from the 3/27 low.  This seems like the likely next move on the futures and only a breakdown of yesterday’s low would change that and suggest scenario one is in play (or a failed 5th wave up?).

So, for today I”m looking for a pullback that does NOT take out yesterday’s low, which will make the right shoulder of an inverted head and shoulders pattern and setup the “c wave” up tomorrow morning on some positively made up job’s data.  This should end it all and setup next week for the next series of waves down.  It should be slow at first as they will first have to carve out the A down and B up, which as we all know the “B up’s” can be brutal short squeezes… then the C down should come later next week or even get pushed out into the week afterwards.  So far that’s what I see as “most likely” and will of course keep everyone updated if I see something different.