Thursday’s trade was not exactly in line with what I felt the market would do today. The ES saw somewhat of a down draft instead of an updraft. My initial assessment would be that the minute wave 4 was still in progress. The drop below support at 4575, and then again 4550 brought about three possible scenarios that could get played out. The first being – yes wave 4 is coming in larger than expected but it hasn’t broken any rules just yet and yes I could move the minute wave 1 down to remove the danger of a cross over. However, additional downside really does begin to negate the count as it stands. So if the stronger upside is still coming, the ES needs to see that begin basically during the globex session with follow through when the U.S. markets reopen tomorrow morning. If the buyers are intent on getting to additional highs for expiration they would need to be persistent and strong.
The second scenario would suggest that the 4631 high completed the balance of the Minor “C” wave and in turn the Intermediate wave 2 correction. If this is the case, as I’ve stated the selling needs to start getting heavy and persistent. What we saw in the last hour of trade today needs to continue during the globex session and then again tomorrow morning as the U.S. opens. A break below 4524, the current position of the hourly 200 MA would likely bring downside acceleration with support dropping to 4513 to 4501.
The third scenario is that the 4631 high completed wave A of the Intermediate wave 2 with wave B underway now. Wave B would then find support at 4441, 4382, 4324, and then 4280. This view suggests that an additional strong advance is still out there to come and that could raise the potential for new all time highs. Should it be the case I will for sure be taking a very close look at the long term counts and updating them as necessary. With all the negative that is taking place in the bond market and all the negative that is surrounding the FED at the moment I would surprised to see the markets shoot higher towards the “moon.” But a longer more complex Intermediate wave 2 does remains in the picture which would include a strong decline in the context of wave B reaching as low as 4324 to 4280 and then a “C” wave bringing the market back above 4631 to complete Intermediate wave 2.