ES Morning Update February 7th 2023

Yesterday looked and felt like a “pause” day to me. It’s did a lot of wave 1′s and 2′s intraday and ended about midway in between by the close. I see nothing bullish here from a technical point of view and nothing bullish from any other point of view. I mean like… the bear stops got ran last week, the FOMC meeting is over with, most of all the big boy stocks have released earnings now, so what’s left to rally the market?

If the smart money isn’t buying and the “fear and greed” index is at extreme greed levels, with the majority of the people long right now, what on Earth could cause it to go up? There’s negative divergences everywhere and from an Elliottwave point of view we are in Small Wave 3 down inside Medium Wave C. I could be wrong the wave count of course but too many other factors tell me the market is going down lower, not up higher.

Now if by the end of this week we haven’t dropped hard and taken out many support levels below (I can’t tell you which ones as it’s more of a “feel” then levels) then the bulls could work off the overbought conditions I guess. But it might take 2 weeks (or more) for them to break out with a new strong rally up higher then last weeks high. The best case I can see for them is sideways like the mid-December 2 week chop between 3800 and 3900. I will remain bearish all week until I see either that base built or a very large drop happen.

On a side note, Powell speaks today at 12:40 pm EST, and while I don’t expect him to say much there’s always a chance of him saying something to cause the market to drop hard.  Everything is super bearishly aligned right now, so he could say anything new really and the market will react from it.  If it’s something about raising rates more then what the market expects (which is only another .25 points) then that will cause the sell off.

Or, if he says they are going to “pause” that too will cause the market to sell off.  Why you ask?  Because the market will realize the economy is weaker then thought, however it could first do a fast move up in excitement first.

It’s tricky you see as he’s “damned if he does or damned if he doesn’t” as it’s about how the market views the reason for what he does.  So if he’s too hawkish and talks about going another .50 points in a rate hike the market will think the economy is worst then expected and sell off and if he pauses the market will think the economy is weaker then expected and sell off.

He’s like a rock in a hard space.  Best thing he could do is plead the fifth and say nothing.  Have a blessed day.