ES Morning Update April 10th 2023

Friday turned out to be day to pin the SPX around 4100 it seems as after the morning dip, and rally back up, the last half of the day just went sideways. I was hoping to see it go back up to Wednesday high of 4133.13 (SPX) but it never happened.

Maybe it does it today… who knows? But I’m not taking that risk as I exited all my longs at the close Friday and took a small short. This week is likely going to carve out a series of wave 1′s (or A’s) down and wave 2′s (or B’s) up to allow a wave 3 (or C) down into the middle of next week. Just a “best guess” but I think we’ll have a low for this coming pullback between Tuesday the 18th to Thursday the 20th.

I’m not expecting a lot as the 200 day simple moving average on the SPX is at 3943 as of the close last Friday, so that’s about the max I could see on this coming pullback. Therefore somewhere between 3950-4000 SPX is my target zone to go long at (and of course exit my shorts).

All of these targets on the ES Futures will be +30 points as it’s still running that much higher then the SPX. It’s a pain to go back and forth between them as I trade the SPX in options but chart the ES Future. So the range for the pullback in a low some time next week would be 3980-4030 on the ES basically.  The 200 day simple moving average on it is now at 3957, but I doubt if it goes that low.

From there I think we go back up into mid-May and then pullback again into late May or early June… basically an ABC move. Meaning I think we could be inside a range for several more months before we take out the 2/2/23 high and make a much stronger rally toward the 8/16/22 high.

Now let’s discuss the wave count as I need to adjust it to align up better with “time”, “seasonality” and of course the technicals.

Ok, I’m going to make some big changes to the wave counts as it’s been bugging me all weekend. But… it does NOT change the overall bearish pattern for this year. It still suggests that we’ll have a large move down to a lower low (like 3000 or below?) later on, like after a July or August top. I’ve been leaning toward bottom in that time period but now I’m leaning toward a top and then a bottom in September or October.

Why you ask? Here’s why…

The “time line” just doesn’t match up with prior time lines for a larger degree A wave down and larger degree B wave up. I’ve labeled the Medium Wave B up as happening from the June 17th, 2022 low of 3639 up to the August 16th high of 4327 (ES) as being complete in just that 2 month period.

Here’s that old wave count…

Then I have labeled the market as starting the Medium Wave C down from that August high… but that just doesn’t “feel” right. When you go back in time and look at many prior periods where you have a 5 wave move down for a larger degree A wave you almost always have a long, drawn out in “time”, B wave up.

It is the wave of “exhaustion” for most traders as it subdivides and subdivides until you forget all about the larger C wave down that you keep trying to short and catch. The B wave just wears traders out over an extended time period and then when all the bears give up and think the C wave is not coming, and that the prior low was “the low”, out of nowhere we get some large drop to a new lower low.  Everyone misses it but then the low really is “in” for a long time.

Most C waves are fast and short in time. Yes, they still subdivide into 5 waves but they don’t have long drawn out wave 2  or wave 4 bounces. They commonly last a few days at most, not weeks or months like the wave count I’ve been going off of for several months here currently.

Now I understand this might be frustrating to you that I’m changing my wave count but keep in mind that I’m not trading multi-month long or short positions and just swing trading for a few weeks at a time.

And I’ve been winning on those trades with my new style of trading anyway, so the longer time line and wave count isn’t going to affect me much. However, I do think that some of you might want to try and catch “the big C wave” down… whenever it comes. So I’ve zoomed out and looked at the weekly chart to try and figure out bigger waves… specifically the Medium A and Medium B as they will give me the best clue for when the Medium C down should happen.

The new wave count…

So let’s cover the weekly chart above. As I said I hate to keep flipping back and forth on the wave count but it’s important to be flexible and adapt to what makes the most logical sense… and this one does (at least for right now… LOL).

It took 9 months to form the Medium Wave A down from the January 2022 high to the October low with this wave count. And since past history tells me the B waves drag out in time (check… doing that right now) and that the C waves are fast and surprise everyone (check… everyone will forget it if we take out the 8/16/22 high, which I think we will) this wave count makes the most sense.

From the October 2022 low we could see another 9 months to finish the Medium Wave B up and that would target July roughly. It doesn’t have to be 9 months in time of course but the summer months and early fall is when many tops happen in the market when you look at Seasonality.

The months of July, August and September are the most common one’s, and since March is a common low period we should be in a bullish time right now until summer or fall. Therefore I have to adjust and factor all of this data into my calculations and wave count.

Since pretty much every C wave down “takes out the bear stops” prior to starting I have to think that August 16th, 2022 high will be surpassed prior to Medium Wave C down starting. On my new updated chart I put Tiny Wave 3 up, inside Small Wave C up, inside Medium Wave B up… as a likely double top to that prior August 16th, 2022 high.

On the old chart I have “set 5″ inside “ET3″ as topping around 4259 ES, which on this new chart would be the double top zone for “T3″, inside “SC”, inside “MB”… and “time wise” I think it will be in July sometime, possibly late June.

Then a pullback for Tiny 4 (could be 2-3 weeks of chop?) and finally Tiny 5 up “runs those stops” and that’s when everything ends with all the waves completing to finish Medium Wave B up. From that point the market should take a series of 5 small waves down for Medium Wave C over the next month or two.

Prior that all happening of course is where we are today…

It’s likely that we ended Tiny Wave 1 up on February 2nd, 2023 and we are going to do an ABC down for Tiny Wave 2 into the end of May or so. Over this week and next I think we pullback to the 3950-4000 SPX zone for the A wave (Extra Tiny Wave A) and then a B up into early-mid May, which should NOT take out the high last Wednesday (4133.13 SPX and 4166 ES).

Then we should drop for Extra Tiny Wave C down into the end of May to probably go just a hair lower then the coming low next week. I say that because they like to “take out the bull stops” too, right before a strong move up.

From that point we should start Tiny Wave 3 up into July where Tiny 4 down and Tiny 5 up will likely be a period of chop that the main purpose will be to shake out any shorts and lure in bulls looking for new all time highs. This is my big picture thoughts here, which is basically the same as what I’ve been talking about all year, but I’ve had to adjust the wave count and the time line for it to play out.

Short term I think the top was in last week and that early this week will be choppy to form some wave 1′s (or A’s) down and wave 2′s (or B’s) up, and then late this week and going into the middle of next week we get a bigger drop to 3950-4000 SPX (3980-4030 ES).

Have a blessed day.