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By Red Dragon leo (Reporter)
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ES Morning Update May 1st 2023

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Last Friday I was looking for a choppy sideways day… wrong! It kept squeezing the bears all day long and into the close.  I missed that one for sure. Well, at least I didn’t have any big shorts on as I’d closed most of them out with a nice profit.

This week we have the all important FOMC meeting on Wednesday, which is likely to produce a drop afterwards this go around. I’ve said in the past that most of these meetings are duds when it comes to the market changing the trend as a result of something said, but this one could do just that.

The past several years there’s not been any good “turns” from them as usually the market has some wild swings intraday of the event but closes going nowhere really. Then several days to a week later the trend might change, but it’s not been as a direct result of the meeting, but this time might be different.

I say that because of what just happened last week with the big squeeze on Thursday and Friday that took out a ton of stops on the bears. This will open to door for a sharp drop after the FOMC as not many will be short. Most will be looking for a move up over 4200 to run for 4300, but I don’t think that will happen. There’s smart money above that area and they will keep adding shorts every time the market gets up there, so that resistance zone is still too strong to break-through right now I believe.

The Fed will likely “pause” just at the right time when the charts are oversold so that a really strong move up can plow through that zone. I don’t think that will happen at this meeting… especially with the short term charts overbought now.

My thoughts on this are that we’ll get another sharp pullback after the meeting to revisit the low from last week. We’ll probably make a higher low as I suspect we won’t see the lower low happen until mid-late May. Why you ask? Because bulls will buy this pullback for a possible double bottom and they will need to be taken out before the powerful June rally takes out the 4200 wall of resistance.

It might go something like this… we pullback next week after the FOMC and bottom in the second week of May between the 4068 low on the ES and up to say 4100 roughly. A double bottom to lure in the bulls to buy it, which is fine as that pretty much guarantees that 4200 isn’t going to break as the market never makes it that easy.

Bulls won’t likely be long when it does give way, and with the Seasonality Chart showing weaken until the end of May it’s not likely going to happen this soon. After that rally back up fails at the 4200 zone again, which might end the week of OPEX in May, then another drop happens into the 4th week of the month. That one should take out the prior low last week to hit the stops on the bulls.

Meaning that the rising light blue trendline on my chart of the ES could be hit, and that’s going to be a little over 4000 by the time we get there in late May. From that low we do a face ripper rally to take out 4200… but keep in mind that once all those stops are hit there’s nothing left to hold it up there. Therefore the 4300 zone is likely about all we’ll see with that strong move up and then we’ll get another pullback.

How much I don’t know? This will be the point where we’ll be guessing on whether or not we are on the Bullish Wave Count or the Bearish Wave Count that I covered in prior posts. If it’s the bearish one then we are going to tank hard with 3000 or lower as a target, but if it’s the bullish one then a higher low of say 3700-3800 is likely.

From that low we could see a new all time high into the end of the year. What would cause that you ask?  A mega short squeeze on all the bears looking for a crash is your answer.  This could be the plan as they might want the market up at extremes going into 2024 since it’s an election year and the DEMONcrats will want to brag and boast about the stock market being up, even-though they failed at everything else they touch.

That’s all speculation of course I don’t have a clue what their plan is. For all I know we could see the crash to sub 3000 and then they pivot and race to new all tiem highs. Wouldn’t that be nuts? To see a drop that low and then a new high in the same year… that’s crazy, but possible. It would require some type of “event” to cause the crash of course but there’s plenty of craziness going on in the world right now, so the list is long of possible reasons.

Ok, for the short term (I’m going to try this again… LOL) I think we go up small and then sideways into Wednesday with a small downward bias, then drop after the meeting into the end of this week with 4100 possible. Have a blessed day.


Source: https://reddragonleo.com/2023/05/01/es-morning-update-may-1st-2023/


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