ES Morning Update February 17th 2023

Yesterday opened near the lows from the premarket, rallied up and went sideways midday and flushed back down into the close to revisit the morning low. Today is likely the last chance for the bears to crush it, and I mean they must take out that 3950 zone where all the trendlines of support intersects and the 200 day moving average.

I put the odds of that happening as “quite low” on the first hit due to how much support is there and how long the sideways topping area has taken. I put the odds of a strong bounce back up to this 4150-4200 zone as “very high”, and the odds of taking out 4200 as “medium”.

I’ll just say that next week is important for the bulls and the bears. While I think there will be a strong rally off any drop today to the 3950 zone I just don’t know if it gets through that 4200 zone or not?

If the bulls are going to do it then they will want to use all the new bears shorting the drop to 3950 as fuel to get through that resistance, which means they need to keep the momentum going up next week and NOT slow down until the get up to 4300 or so.

However… afterhours yesterday there was a new FP put out on the QQQ for 309.21, which “if” my hunch is right we’ll drop hard today to the 3950 zone where all that support is at, and then rally back up to that FP on the QQQ for a lower high next week. That should scare all the new bears out and lure in new bulls expecting a breakout of 4200… but again “if I’m right” that will be the last high before a big drop into early March as the 3950 shouldn’t hold on the second hit of it, that’s if it’s hit today.  We might not get that low but wherever we get to should end the move down today and next week the market goes up to the FP.

I hope it’s the one that takes out the low but it might not be? It could only go to 3700 or so as that would take out all the bulls from the 2 week sideways base built last December between 3800-3900, and it would lure in new bears looking for a lower low. I’d call that mass frustration for both sides if it bottoms there, and if it then rally’s back up again into mid-March to just under 4200 again and stops to again… frustrate both sides.

Bulls would be thinking it’s going to breakout and bears will throw in the towel on the shorts. But if that’s a slightly lower high then another big drop can start, and it could be the one that takes out the low. So this could drag on for several months in a range between the 3500 low and the 4200 high until all sides just give up.

Then we could see the final leg down to 3000 or wherever, and that might not be until June or July, who knows? They aren’t making this last move down easy to catch, so while I do think we’ll see it this year I’m not ruling out more big range moves for several months before it happens.

I have my fingers crossed for the drop to 3950 today, the rally back to the FP on the QQQ next week and then the big crash leg into early-mid March for a new lower low well below 3500, but predicting it in advance is never more then a best guess.  I just take stabs at it and will adapt if we stall out on the way down.  It won’t be easy.  Good luck to everyone.

Have a great weekend.