ES Morning Update October 17th 2018

This morning we see the futures backing down some from a very large rally up yesterday. The key today will be whether or not they are able to turn back up and make a higher high or not. If they manage to do that then it’s likely a short as it will be an exhaustion move in my opinion. But if they drift down more throughout the day then I’d expect a bounce back up tomorrow for a lower high, double top, or slightly higher high. The bottom line here is that today or tomorrow is likely going to put in the top.

But I won’t rule out some choppy up and down swings until Friday or early next week as the market makers do the monthly options expiration dance to pin the SPY where the most puts expire worthless. That means we might see a little more upside to the 2830′s maybe? It looks like a wave 3 up yesterday of some degree and this morning pullback is a wave 4 down. So a 5th wave up might be next and it could be a lower high or higher high… just not sure?

Most Elloittwave chartist tell you that corrective waves only breakdown to 3 waves instead of 5 waves. Since odds are good that we’ve topped out and this is a corrective wave back up one could argue that it’s finished as it clearly had 3 waves up from the low on the 12th. Catching the exact high of this bounce is tough and I can’t say for sure if it’s already here or there’s a higher high yet to come. On another note today is the reading of the minutes from the FOMC meeting last month.

Usually nothing much happens but the market tends to still listen in hopes that the Fed Chairman will add something new verbally. If they want to goose the market up a little higher today would be a good day to say something to cause it. So a possible top could happen today if they spike it up after 2pm EST. I’m probably 50/50 on yesterday being the top of this bounce. If it wasn’t for this week being the monthly options expiration week (which is mostly bullish probably some 80% of the time) and the FOMC today I’d say the top was in yesterday. But those two extra pieces of information make me “pause” at taking a short. However, if we rally up into the close and put in double top or higher high I’ll be more incline to short this pig. Best of luck to you… we are close.