ES Morning Update November 9th 2021

The Pause Before The Storm?

Nothing has changed again it seems… literally I mean, as the market didn’t move up or down but an inch or so yesterday. Will it do the same today? Anything is possible but it should start to roll soon. I remain bearish here as the risk of a sharp drop is much great then odds of another big squeeze.

Timing that drop is of course very hard, but currently the high last week is still holding and the daily chart is very overbought on the RSI and ready to rollover anytime now. This 6 hour chart shows the same with its’ RSI hanging out in overbought territory and struggling to stay there. When this pullback come they won’t make it easy to just “buy the dip” as too many people are all bulled up still, so it’s got to be a tricky bottom.

The Seasonality chart show two periods in November where pullbacks are common, and one period in December. The rally up into today is clearly following the pattern of that chart as it shows a strong move up the first week of November. Then some chop and a pullback into mid-month, bounce back up and down again into the last week… but not the actual end of November.

While this Seasonality chart has been tracking very well the depth of any of these moves isn’t reflexed in the chart, so don’t get married to the pullback just being a third or so of the rally up from October. It could be a deeper move that takes out the October 1st bottom even, or just some double bottom? The point here is that we could see something tricky this month and next before the next huge rally starts.

The pattern on that Seasonality chart looks like an ABC down move is coming to me, with some first low this week or early next week, then some bounce into the month option expiration (OPEX), followed by a late month second drop. I do think this will play out, but not just based on the Seasonality chart… no, it’s based on how overbought we are currently. I still think we can drop down to that FP on the QQQ of 360.27, which is probably around the 78.6% Fibonacci Level, or 4356.67 roughly. If we do that then everyone will go long I think, and of course that will get me very worried as to how easy it was to “buy the dip”… and SkyNet never makes it that easy.

What I then will be on the look out for is some second surprise “deeper then expected” drop in that mid-December period on the Seasonality chart. I get the feeling that pullback will take out the bulls that get long this first expected pullback into the end of November. We’ll have to cross that road when we get there but just keep that in mind as December could be very tricky. Have a blessed day.