ES Morning Update February 6th 2024

We did not get the move up to the upper trendline in the rising dashed orange channel yesterday, which was targeting 5050 or so. Instead we pulled back and closed down a little. This tells me that odds are pretty good that the 5 wave move up from 1/5 low of 4702 completed on Friday at the 4997 high.

That means small wave 1 up ended and we have started small wave 2 down. Since this entire week is slightly bearish from the Seasonality Chart I think we will chop into this Friday to complete that small wave 2, which will probably subdivide into an ABC and those waves could subdivide too (most C waves have 5 waves inside them).

If this is correct (meaning we don’t make a higher high today then Friday) then we are in the tiny wave A down currently. I do not know how it’s unfolding, meaning “is it just one wave down and ended at the low yesterday”, or is it going to subdivide into 5 waves? Since there is a full week of “time” that needs to be used up I lean toward the ABC unfolding in a 5 wave down, 3 wave up, and another 5 wave down pattern to end all the waves and complete Small Wave 2. Below is an example of what could happen.

Now that’s just a guess, so I would never try to trade it. I’m only looking for a long this Friday if we get an oversold 6hr chart and appear to complete the series of waves down. Next week is very bullish from the Seasonality Chart and it’s OPEX too, so any pullback this week is another opportunity to get long I think. What’s next will be a small wave 3 up inside medium wave 3, so it should be quite powerful if I’m correct?

And I’m going off the Alternative Wave Count I posted yesterday as so far, that’s what I see as likely. Keep in mind all those lines on that chart are “if” it unfolds in a 5,3,5 wave pullback. It could be something else, but again… with so much “time” to burn off before the Seasonality period gets bullish I do lean toward this happening. It’s a game of patience right now as this chop will destroy you if you try to trade it.

Or…

If I’m wrong on the Alternative Wave Count being “in play” now, then we are on the other wave count, which we completed medium wave 1 up inside large wave 2 up on last Fridays high.

What this means is that the pullback late February into March should be much deeper as it will be a higher degree wave.  On the Alternative Wave count the coming pullback will only be a Small Wave 2 down and on the First Wave Count (didn’t name it, but I’ll just call it “First” from here on out) it will be a Medium Wave 2, which could drop the lower trendline in the rising white channel.

That chart is below and obviously more bearish…

I’m showing it on the daily chart, whereas the other chart with the Alternative Wave Count was on the 1 hour chart.  I was zooming in on the shorter time frame to try and predict this week on it.  But on this daily chart I’m zooming out to show what could happen if we are on the First Wave Count chart I posted on Mondays morning update.

Notice that there’s not much change for this week as it will still be choppy as the Small Wave A unfolds into the end of this week.  It would be a pullback to around the 4866 low from last Wednesdays FOMC meeting.  Then the typical rally up into OPEX happens, but on this wave count it will only make a lower high (meaning “fail” to take out 4997), which will be a Small Wave B up.

From there is where it gets really tricky, as we could drop hard in the Small Wave C inside Medium Wave 2 to the 4400 zone… if this wave count is the right one?  On the Alternative wave count we make a much higher high as we run up in Small Wave 3 of Medium Wave 3… so I’ll be looking very closely at the technicals when we get there as I don’t want to be on the wrong side of the trade.

The ONLY thing that determines which wave count is correct is where I label the end of Medium Wave 1… that’s it!

I put it as having already ended at 4841 (12/29/23) on the Alternative Wave Count, whereas on this First Wave count it would have just ended last Friday at 4997.  On that chart from Monday I only pointed to a 4800 low for Medium Wave 2, but I think I made that estimate too conservative.  A drop for a Medium Wave 2 should be much more.  Maybe it only goes to 4600, I don’t know?  But it could reach 4400 if it wants too.

I’m 50/50 on which one is correct now as I really just need to see how this week unfolds and the rally up into next week.  It could go either way and while my lean is with the Alternative Wave Count now I will quickly jump ship if the technicals tell me to do so.  I’m not married to a wave count.  All Elliottwave is speculation, which I base on technicals, seasonality and turn dates.  With both wave counts though I still expect much higher prices after the pullback, but with this first wave count we’ll get a deeper drop.

Have a blessed day.