Tuesday’s trade saw the market gives us additional information as to direction and count. The ES again produced a much weaker wave 2 correction with minute 2 not reaching the minimum at the Fibonacci 38% area. The Globex high at 4303 marked the completion point for minute wave 2 with minute 3 unfolding. The ES did break below 4200 and still needs to break the low of Intermediate wave 1 at 410. That would give additional confirmation that the larger Intermediate wave 3 is in control and continues to subdivide. MSFT and GOOGL reported, and the sellers kept control of the markets after the close and continued to drop the indexes. The ES completed the minute wave 2 at the Globex 4304 high, which was under the minimum I look for in a 2nd wave pullback.
This is what I speak of and look for to receive confirmation that a) my count is correct and b) what to expect moving forward. The “crash” talk is increasing. Duetsche Bank issued a report saying the U.S. will drop into a “mild” recession, which I suppose adds to the “point of recognition” I speak about. That point when traders realize that “it” is going to happen.
For tomorrow, I would expect additional downside but please keep an expectation in place for bounces, with the ES quickly jumping higher from the opening of Globex. Bounces will happen and they could be larger or smaller than ‘normal’ expectations. Support for minute wave 3 continues at 4109, 4081, 4056, and then 3988 which is where minute 3 would be equal to 100% of minute 1. Once minute 3 is complete look for a minute 4th wave corrective bounce followed another leg down in the way of a minute 5 wave decline — additional support for the balance of Minor wave 3 comes in at 3914, 3867, and then 3792 which is the Fibonacci 161.8%. I would expect a stronger bounce higher in a Minor 4th wave correction – and once underway I’ll be able to add Fibonacci.