ES Morning Update March 6th 2023

I spent the weekend thinking about the wave count and it’s time to update it. Nothing changes from the all time high last year in January down to the October low, but after that there are a few things that need replaced.

The main difference is that I now believe that Small Wave 2 up (S2) has already completed on 12/13/22. The reason for that conclusion is that the DOW put in it’s high on that date and hasn’t went higher since then.

So while the SPX/ES did go a higher on 2/2/23 I think that’s just a “throw over” or “stop run” as it’s a lower high on the DOW, which is the more accurate index I believe because it’s been around the longest and has only the 30 top stocks inside it, versus 500 in the S&P500 where one stock could go nuts and mess up the wave count… that’s “if” you didn’t allow for “throw over” moves, which all most Elliottwave Chartists do now and have done so since the Futures Market was started.

They mostly happen on the wilder indexes but can happen on any of them actually.  In this case, when I look at the various indexes, everything points to Medium Wave B topping on 8/16/22 for all of them… even-though the DOW did not put in the higher high there.  I realize the the 12/13/22 top for Small Wave 2 (S2) should have been below the top for Medium Wave B (MB) on the DOW but I still think this is the correct count and just accept that it’s just a throw over move.

What this means is that we won’t likely see any move up higher then that 2/2/23 high of 4208.50 on the ES Futures and I doubt if we even get over 4100, but possible I guess. That high is a lower high on the DOW, which I believe is Super Extra Tiny Wave 2 (set 2), and it’s lower then the 1/13/23 high (on the DOW again), which is Extra Tiny Wave 2 (ET2).

Ever since the 12/13/22 high on the DOW each and every rally back up has made lower highs, but with the SPX/ES there’s some with lower highs and others with higher highs. Again, I think these are just stop runs (throw overs), so the true wave count is likely on the DOW.

What does all this mean you ask? Let’s look at the DOW wave count…

You can see I’ve labeled all the wave counts up until now on the chart above. Currently we are in Small Wave 3 down (S3), inside Medium Wave C down (MC), but in the choppy period where traders keep buying the dips and not allowing the market to breakdown hard… yet.

Sidenote: Medium Wave B was higher on both the S&P500 and Nasdaq then here on the DOW so the “throw over” happened on it this time, but it’s still the likely wave count.

I believe this chop will continue this week and even into April, but next week we should see a crack in this dam… meaning a move down to 3700-3800 is very likely. The biggest part of it should finish by OPEX on the 17th, or carry over into part of the next week to put in a bottom around the FOMC on the 22nd.  And while I don’t show it on the chart below (ET5) I do think there will be a week long battle around the 3800 level that might look like the two week base built between 3800-3900 back in December of last year.  I’m 50/50 on whether or not it breaks?

On the chart of DOW that would be the end of Tiny Wave 1 down (T1), inside Small Wave 3 down (S3) that we’ve be in since the 12/13/22 top for Small Wave 2 (S2). I don’t have a price target on the DOW chart but instead just drew some yellow lines to show the expected movement up and down.  That Tiny Wave 1 low should be below the 200 SMA I believe.

Now let’s look at the chart of the ES…

The bears will wake up when this happens I’m sure, which should cause a rally back up for Tiny Wave 2 (T2) into early April I believe. That rally could reach the 4050 zone again but that might be asking too much, as you have to remember there will be a ton of bearish pressure on the market from the daily and weekly charts by the time this happens, so we might just see 3950-4000, which is the recent chop zone from last week.

Basically the move back up would backtest the recent lows that were created last week, and likely this week too. Once that last decent rally happens (early to mid April) I think we start Tiny Wave 3 (T3) down, inside Small Wave 3 down (S3), inside Medium Wave C down (MC), inside Large Wave 4 (L4), which will be one very nasty wave that should take out the October low last year and cause panic selling into the end of Small Wave 3 down (S3).

For the short term I think we completed (or will complete today) Super Extra Tiny Wave 4 up (set 4) and will go down today for Super Extra Tiny Wave 5 (set 5), which is inside Extra Tiny Wave 3 (ET3), further inside Tiny Wave 1 (T1).

This could carry into Tuesday or Wednesday, not sure. But it should not break the recent low last week just above 3900. It might double bottom it, but I suspect it will fall shy of hitting it (3925 on the ES). For it to be perfect you’d want to see this 5th wave (set 5) make a lower low, like 3900… and that’s in an ideal world. But it’s possibly that it will truncate short as dip buyers will keep it from going that low.

I could be wrong but in any case the 3900 area should not be taken out this week.  Yes, another rangebound week is likely.  Don’t you just love it?  Just kidding of course as these periods are the hardest to figure out and trade.

After that low is reached, which will complete both Super Extra Tiny Wave 5 (set 5) and Extra Tiny Wave 3 (ET3), there should be another rally back up to try to reach 4100 or better. I doubt if that happens either as while it should go higher then the high of Super Extra Tiny Wave 4 (set 4), it doesn’t have too.

It could just double top that level, or truncate short? Yes, it’s a larger degree wave but it’s still not likely a strong one. So this Extra Tiny Wave 4 up (ET4) might stale out around 4050 or a little higher, but I doubt it breaks 4100. My guess is that it ends by this Friday, but that’s just a guess of course.

It’s based on how much time is usually needed for these smaller degree waves to play out, and that’s about right for them. Therefore if this plays out, and we see a close on Friday up near 4050 or so, then odds are pretty good that Extra Tiny Wave 4 (ET4) is finished and Extra Tiny Wave 5 (ET5) will take us down to 3700-3800 the following week or so. And as long as this continues to be accurate I think April and May should be one ugly period for the market.

We could see 3000-3200 by then to end Small Wave 3 down (S3), which would be a great long for Small Wave 4 up (S4) because so many people in the past have been calling for that area and will think the bottom is in and go long.  But it should not be finished as after the rally for Small Wave 4 up ends (probably a backtest of the October 2022 low) then Small Wave 5 down should take us to another lower low… like 2600-2900 most likely.  And that should be into July I suspect, which then will end it all and finally start the next HUGE multi-year rally to insane levels that I think top out in 2027 where we’ll then experience a 80-90% crash like 1929 did.

Have a blessed day.