ES Morning Update March 11th 2024

Written Sunday Day…

A nasty reversal after hitting and piercing my FET (Fibonacci Extension Target) of 5190 on Friday. While this is still a new system to me, that I’m learning over time, it nailed the top of that move perfectly peaking at 5193 before rolling over. Whether that high was the top of Tiny Wave 3 or Tiny Wave 5 is the tough question right now that I’m not sure about.

If it’s only Tiny Wave 3 then we have another move up to a higher high (ideally the next FET at 5225.16) still coming before we pullback for Small Wave 4… and this might happen around the CPI number before the open tomorrow?

I must say that a move up to that level to complete Tiny Wave 5, and Small Wave 3, would fool a lot of people as they would not expect another larger pullback for Small Wave 4 to happen the rest of this week. Now I don’t know if this happens or not but it’s certainly possible and would be perfect to keep my wave count working.

Sidenote: I just noticed I made a mistake on Fridays post as on the 1hr chart I label the two Medium Waves wrong. Those should be M3 and M4, not M1 and M2.

If this happens we could do the pullback for Small Wave 4 in front of the FOMC next week on Wednesday the 20th, which is where we could see the final move up for Small Wave 5 into Friday the 22nd, which is where the turn date is at.

We have the roll going on now for the ES futures from the March contract to the June contract, and I believe it’s going to be 62-64 points higher then the SPX, which last Friday they had narrowed that gap to about 4 points. On the trading platform I use (Think or Swim) the roll just happens all as once, whereas other platforms it happens over a week I’ve heard. The roll should happen today I believe, but that March contract doesn’t expire until this Friday.

Anyway, my point is that this “extra 62-64 points” is going to make it easier for the futures to hit my final FET at 5334.39. On the SPX the FET is only 5293.44, so that’s a 41 point difference between them. Keep in mind though that these final upside targets could fall shy a little because they will be the last gasp exhaustion move. But I think they will be close, and if this plays out the way I think it will the last rally will happen right after the FOMC next Wednesday and top on that Friday.

As for this week… it could be full of wild swings up and down as SkyNet shakes out some bulls and lures in some bears. Call it “running stops both ways” if you like, or call it a “liquidity grab” as when there’s not many buyers left the market will use trapped shorts as fuel to go back up.

That’s where the squeezes come from as the bears are force to cover those shorts, which means they are buying back their position at a loss… but that is still “buying”, so the market goes higher.

I don’t know what the Fed says next week but possibly it excites the market to cause that final rally? We would need to be going into the meeting with short term charts oversold, which is very possible as that would be my Small Wave 4 down, and it could be an ABC as well, and that would fool a lot of traders with the wild swings up and down this week and early next week. But that’s how the market fools the most, so we should always expect the worst trading environment, and that would qualify for sure. Let’s look at the 2 hour chart below for what I’m talking about.

Now all of the wave counts and movements are just my “best guess”, and I change them as the market unfolds. I have to keep adjusting as the market makes its moves. I could be completely wrong about the move up after the CPI as we could drop afterwards instead? If today produces a small rally that doesn’t make that new higher high, to hit the FET of 5225, then possibly we drop first after the CPI tomorrow and then rally back up into 5225 by Wednesday?

That would be like an ABC down for Tiny Wave 4, which is very possible. The point here to note is that it’s very risky to try and trade in front of the CPI, and (in my opinion) is much better to wait to see what happens afterwards before thinking about placing a trade. What if we rally small today, and tomorrow the CPI doesn’t make the market go any lower and instead just give it that last squeeze up to 5225? That’s very possible too, which would mean the low we saw on Friday was it, and that it completed Tiny Wave 4 down.

It does not have to unfold in an ABC, as it could have been just a one wave pattern. Most of the Tiny Waves, and smaller degree ones, do indeed play out in just one wave… especially the 2′s and 4′s. Now Tiny Wave 3 up did subdivide into 5 smaller waves, which is normal for wave 3′s, but the smaller you go in degrees of waves the less likely they will do much subdividing.

Moving on…

My goal is to look for on more long up into next Friday to hit (hopefully) the final FET of 5334, which might fall shy a little as this isn’t an exact science. If we only make it to say… 5290 and everything looks on track (meaning the waves look complete, or close to it, and the technicals look exhausted) then it’s a short in my opinion.

As for today or tomorrow I’ll just be watching the RSI on both the 2hr and 6hr chart to see if they get oversold enough, and to see how many points we’ve pulled back. If today is a green day will little downside I’ll assume we are in an ABC and it’s the B wave, meaning we’ll get the C down after the CPI tomorrow… but we could fully reverse and end the day green.

Or if we drop lower today going into the CPI and close red, then odds suggest that’s all we’ll get in the cash market. I mean, we could see the CPI cause a lower low right after it comes out, but by the open it could rally back up to green. So I’ll be watching my charts closely today to see if there’s a good long setup or if I need to wait until after the CPI (which I prefer).

Written Sunday Night After The Futures Rolled…

As I continue adding to this post throughout the day the futures are now open and low and behold we have gaped up to make a higher high, which now completes Tiny Wave 5 and Small Wave 3 up.  So, we can scratch the idea that the CPI number Tuesday morning before the open will be used to complete that pattern as it’s not needed now.  Here’s that chart…

So we should be on track now for a pullback for Small Wave 4 to play out from this new higher high.  I’m still looking for it to pullback this week to complete this pattern but with the futures up so much now it might only be to close the gap and/or make a higher low.  It tell me to simply watch and wait for the RSI to get oversold this week before looking for another long.

Possibly it happens after the CPI number but that’s is wildcard, as it could also cause another move up.  I don’t think it will be I want to remain open for whatever the market gives me.  It’s not for me to force the market to do what I want but instead to just react correctly to what it gives me.

The Wildcard…

For example, what if I’m wrong about the next turn date on March 22nd being a high?  What if it’s a low instead?  What I’m suggesting here is that we could rally hard in a big squeeze of a 100+ points after the CPI and reach the FET of 5334 (could fall shy?) and then reverse back down to put a low in around the 22nd.  I have seen in the past where the CPI number causes a big spike and reversal afterward.

Look at the 3502 low back on October 13th, 2022 for example.  That was a CPI day, which put in a low and a reversal back up hard afterwards.  And then again on December 13th, 2022 we saw a big gap up on a CPI day that put in a big reversal back down.  This could happen since we are so close to the upside final target.

Do I think that will happen?  No, but it’s certainly possible.  I still lean toward the turn date as putting in the high, not the low.  But if this does happen I’ll be shorting it of course and looking for a bottom into that date.

Now that the SPX is 62-64 points lower, with a high close last Friday at 5123.69, it will need to rally up to 5293.44, which is about 170 points higher, and that’s something I just don’t see happening in one day after the CPI number.  Possible.. yeah, likely, no.  Most likely is that we start Small Wave 4 down this week with Small Wave 3 up completing now with this higher high in the ES futures.  The SPX cash will have a different wave count but I follow the futures and trade the cash, so I’m not too worried about it’s count as in the end it’s not the wave count that is important… it’s making money.

In conclusion we should pullback this week for an ABC (most likely) for Small Wave 4 and then start Small Wave 5 up at some point with an expected top next Friday.

Have a blessed day.