ES Morning Update January 27th 2023

Bulls continued to grind higher yesterday as they are attempting to take out the December double top zone from 4080-4100. I do think they take it out soon… possibly today, who knows? However the RSI is getting up near overbought again so the best move for the bulls would be to go sideways today to allow it time to cool off some.  Then next week they can make another run that could go through it and hold with a possible squeeze all the way up to 4200 or so… maybe even 4300?

But I doubt if they do it. Forming a base for several days before the breakout is the ideal move but sometimes they don’t want to lose momentum and they just keep grinding higher. Unfortunately that usually leads to exhaustion after the stops are run above 4100 or so.

If this happen I’d only look for 4120-4140 to end the move up. That would be a shorting zone in my opinion, but I’m still not sure if the rally is done or not? Maybe it only pulls back for an Extra Tiny Wave 4 on my chart from yesterday with the Extra Tiny Wave 5 up to top between 4200 and 4300 into mid-February.  Or the wave count ends there but subdivides again with another good sized drop that makes a higher lower above the  October low.

Anyway, there are two big shorting areas that traders will load up on, and one is the zone we are in right now up to the 4100 level. The other would be the 4300 zone as that’s the big high from August 16th last year. Both are obvious shorts in my opinion… so will it be that easy? I don’t think so. SkyNet doesn’t do “obvious” very well.

That leaves the door open for somewhere in between, like around the 4200 level. My only concern is whether or not the pullback afterwards is going to be “the big one” or just some higher low where we run back up again for several more weeks to actually hit 4300 (or more as then it might decide to run the stops above it) and then drop for “the big one”.

I know everyone wants to catch that drop but we could stay in a large range for months and frustrate bulls and bears both. I’m not going to spend too much time on “the big one” as it’s pointless to think about right now. I’m just looking for this coming top so I can exit my last longs and get a short to ride down for whatever it gives me. Have a great weekend.