ES Morning Update March 13th 2023 – Weekend Report

Weekend Update

On last Mondays weekend update I laid out the estimated wave count and the timeline for when I thought it would play out. I proposed that we were at Super Extra Tiny Wave 4 (set 4) as of the close the prior Friday (March 3rd) and should end “set 4″ on Monday most likely (March 6th).

Then I thought we would drop into the middle of this past week for “set 5″ to end Extra Tiny Wave 3 (ET3), and rally back up into Friday (March 10th) or possibly Monday (today) to around 4050-4080 for Extra Tiny Wave 4 (ET4). Then we’d drop into OPEX this week (March 17th), or the FOMC next week (March 22nd), which I leaned toward as most likely.

That estimated timeline is wrong as I now think we won’t rally for “ET4″ until later this week, like into OPEX (instead of today).  The move down to 3925 (ES) on March 2nd likely was still “set 3″ and that means that the move up to 4082 last Monday was “set 4″… and that means the move down from there (which we are still in right now) is Extra Tiny Wave 3 (ET3).

Here’s that prior chart for reference…

Overall I’m getting the moves up and down pretty close, which I’m happy with… even if the timeline isn’t matching with the wave count.  And I said that I wouldn’t short and would stay in cash until the waves up (or down) present a high odds short (or long)… which I have done.

Meaning, I was waiting for the rally back up for “ET4″ on Friday (or today) but it never happened and the market went lower, so I didn’t do anything.  It’s about adjusting and allowing the market to extend in time or compress in time… if needed, and that’s what is happening now.  The top for “ET4″ clearly wasn’t on Friday and won’t be on today either.  We are going deeper first with a likely bottom by Wednesday, and then back up into this Friday or possibly next Monday to complete “ET4″ I believe.

As for today, I think it will be a “pause” day, meaning slightly up or down.  But it’s not likely the low as I do think we need a few more days to get fully oversold on the daily chart and end “ET3″ down.

Now I want to discuss a bigger picture wave change with the same outcome as the current one…

On last Mondays weekend update I showed you the chart of the DOW and suggested that Small Wave 2 topped on December 13th, 2022 as that was the high for the rally back up then and from there going forward it kept making lower highs on all the rallies.

Here’s that prior chart of the DOW…

But on the SPX/ES we made a higher high on February 2nd, 2023, so I called that a “throw over” or “stop run” on it because it’s a lower high on the DOW.

Since then I’ve had some time to think about this and it’s bugging me on the “time” for each “wave” up from the October 13th low that is needed to complete the entire move for Small Wave 2 “S2″.

I’ve thought about it a lot and compared the charts to each other and I’ve now come to the conclusion that Small Wave 2 up likely ended on February the 2nd, not December 13th… which means that the DOW just had a “truncated” move up into that date with its’ lower high compared to the higher high on the SPX/ES.

The NDX also made its’ higher high in February, not December, so odds are quite good that the February high did end Small Wave 2 up and not the December high.  This basically changes the degree of each of the waves we are currently in that I’ve got marked on the chart from last Monday but the overall big picture and pattern is still the same.  Meaning the market is still expected to go lower in the coming months.

Here’s the NDX wave count…

On the SPX/ES it means that the move down from the February 2nd high of 4208, to the expected low of around 3800 or so this week, is no longer going to be Extra Tiny Wave 3 (ET3) but instead it will be the bottom for Tiny Wave 1 (T1).  This further means that the 5 wave down from the 4208 high will be labeled as Extra Tiny Waves.

And it also says that we are in Extra Tiny Wave 5 (ET5) now from the 4082 high last week on 3/6, not Super Extra Tiny Wave 3 (set 3).  Again, I think we’ll bottom by Wednesday of this week with the 3800 zone holding.  That means it could stop shy of hitting it, or pierce it a little, but there should NOT be a huge break of that two week base built last December between 3800 and 3900.

This last move down for Extra Tiny Wave 5 (ET5) will complete Tiny Wave 1 (T1) down inside Small Wave 3 (S3), inside Medium Wave C (MC) down.  I expect the RSI on the Daily Chart to be nice and oversold when this happens, which then means a 2-3 week bounce is coming afterwards.

Here’s a two hours chart with the wave count on the ES…

There should be some wild swings up and down around the FOMC meeting next week on the 22nd, but if all goes according to plan then none of the moves down will go any lower then whatever low we put in mid this week (like 3800 or so).

The actually low on the ES was at 3788 on 12/22/22, which might be tested, and maybe even pierced… not sure, but it should not break and continue on down toward the October low.  It should end Tiny Wave 1 (T1) down and a multi-week bounce will follow.

Meaning that if we rally back up to say 3900+ by this Friday then we’ll probably do that same range bound crap all of next week that is similar to the December two week period.  Then the next week we break to the upside for another attempt at taking out 4100 for Tiny Wave 2 (T2), but I don’t think it will be broken.

That rally up for Tiny Wave 2 (T2) should extend into early April, but I don’t think it will last until the 10th-15th that I suggested previously as I’ve changed the wave count, which means the time has been shortened due to larger degree waves completing sooner then expected.  Therefore my best guess is that the first week of April is where we see the top and end of Tiny Wave 2 up (T2).

Here’s a look of that wave count on the daily chart…

The goal this week and next week (for SkyNet) is to shake out the bulls trying to buy the support and get the bears to load up on the shorts.  With this week being OPEX I expect to see weakness into Wednesday as the market probes the 3800 zone to tease the bears.  And then a squeeze up into Friday to lure in the bulls.

But early next week I expect to see that squeeze be given all back as we go into the FOMC on Wednesday.  After the meeting we should see a few more wild days up and down before the first week of April puts a “hurting” on the bears with a squeeze up to around that 4100 level again.

I do not know if that level gets taken out with some fast stop run above the 3/6 high of 4082 or not?  Maybe it does, maybe it doesn’t?  But that area is where Tiny Wave 2 (T2) should top out at.  If it pierces 4100 and runs to 4120… so be it.  I’ll still short the crap out of it.  And if time has ran out (meaning we are into the first week of April) and the technicals show exhaustion, as well as all the smaller degree wave counts looking complete, then I’ll still short it… even if it’s only reached 4060 or so.

It’s about “time”, “pattern” and some about the “wave count”… and of course the technicals.  Once they all look complete I’ll take my chances with a short as the move down afterwards will be a dream one for bears.  It will be Tiny Wave 3, inside Small Wave 3, inside Medium Wave C… a “3″ of “3″ of “C”!  That’s going to be a nasty one for sure.

For the short term…

Today is likely to be a “pause” day, where we go down and up but close around flat.  It could be slightly green or red, not sure but it should not be the bottom for Tiny Wave 1 (T1) down.  I think we’ll see that on Tuesday or Wednesday with the later being most likely.

Again, I don’t think it will break through that 3800-3900 two week support zone built last year in December, but it could do a quick pierce of the 3788 low on 12/22/22 I guess… which would be a stop run only.

But since I’m expecting wild swings up and down this week and next week with the FOMC I don’t think a stop run is needed.  Therefore I think it won’t be pierced.  From what I’ve noticed in the past “stop runs” usually only happen before a bigger trend change… like the 12/13/22 squeeze on the shorts before the open in the ES Futures from the release of the CPI data.  And the same thing with the fast drop to 3502 on 10/13/22 that took out the bulls that time.

Both of those moves happened where the market had NOT built some two week trading zone previously… which is why the December two week chop zone didn’t require a stop run because SkyNet whipped the bulls and bears up and down so many times back then that when it broke out to the upside the bulls we not long as they likely gave up.  And I’m sure there were many bears still short too.

So if we get another period like that period both this week and next week then once again SkyNet won’t need to do a stop run on the bulls as they will likely give up next week from the wild swings up and down that I expect to see.  Plus we all know the Fed is not going to pivot, nor even pause.  So traders will likely become more bearish after the meeting then bullish, which is perfect for the squeeze up to start the following week with into April.

Note:  The ES Contract rolling into the June one last night and has put a spread of about 33-35 points now between it and the SPX Cash.  So all of this update needs to reflect that spread.  Meaning that if I speak of any level you will have to add the spread difference onto it to get the correct level in the ES now, which was within just 2-3 points of the SPX when I did the weekend update on Saturday.

Last night the futures did a big squeeze on the bears as it took out the intraday high on Friday of 3941, which I’m not sure what smaller degree wave count that is, (it should go up in an ABC into April for T2, and the A and C can have 5 waves inside them with the B having 1 or 3), but this morning it gave it back.

It’s the wild swings I think we will see this week and next.  And I still expect weakness into Wednesday, and then a run up to this squeeze high again into Friday.

Have a blessed day.