ES Morning Update May 3rd 2023

Nice droop yesterday. I closed my shorts too early but still very happy with the profit. Today is not going to be easy to figure out as you just can’t “sell the FOMC” because we sold off in front of it. Nor can you “buy it” as we rallied up from the low and we are in a midpoint area now. However, if we rally up to a possible FP on the SPY before the meeting I’d be interested in reshort it… or going long if we retest the low as that would likely get the 6hr chart quite oversold on the RSI and cause a squeeze back up. Here’s a chart of what I mean.

But… keep in mind that even if we rally up to the FP the charts are still bearish into next week so I’ll just be looking to reshort at that higher level. I might be interested in a small long if we get really oversold beforehand as “squeezes” are quite powerful moves, and knowing about the “possible” FP as a target to be hit would make it worth the risks. But again, that’s only if we go retest the lows from yesterday before the meeting today. It’s certainly possible that happens as clearly traders fear the comments from the Fed as evidence by the selloff yesterday. In reality it’s all in the charts and technicals but “events” can certainly accelerate the moves.

Now… what do I think will happen?  Well, logically I’d say yesterdays drop was a wave 3 of some degree, and the move up into the close was a wave 4… so a wave 5 down to retest the low should happen (logically).  But SkyNet is super smart and the thing that would screw the most would be a whole lot of nothing in front of the FOMC.  Like sideways to slightly up or down.

What do I want?  A down move to pierce the low from yesterday to finish a wave 5 so I can take a small long.  Then I’d exit around the FP on the SPY, which could happen all in one day or carry into tomorrow… who knows?

I’d go short after that and hold into next week as it’s likely a wave C down of some degree and yesterdays drop was a wave A, which can be in 5 waves or just 3… but normally 5 waves.  Hence the reason I think we drop to retest the low again today for the wave 5, which then finishes the A down.

The rally up to the FP would be the B wave, and finally we’d see a 5 wave drop next week for the C wave to end it all.

Now when I say “end it all” I mean end that current pullback.  I’d then call that entire drop would be a bigger degree wave A, which then a choppy wave B up into OPEX and a C down into the end of this month toward 4000 or so.

Anyway, that’s what I see for today and the weeks ahead. Have a blessed one.