Weekend Update - ES

ES
Not a good week for the equity markets is a understatement. The ES declined 44 handles on the heaviest volume since March.

It appears that we will have an impulse down from the 1099 H. We have also broken the uptrend channel's from both the July and March lows. More importantly, we have a weekly close solidly underneath them.

This is confirming evidence that, at minimum, we have an intermediate degree top in place. It is too early to determine if the bear rally has run its course. It is entirely possible that is the case.

This is my view of structure off the 1098.50 H (pit session) with a 15 minute chart. This is a beautiful wave structure so far.

I have moved wave (ii) over, which gives nice alternation with (iv). This was discussed in Thursday's update. It also gives us a perfect channel.

Drilling down further, shows that wave iv of (v) appears to have taken the form of a barrier triangle (p. 50, figure 1-42 Elloitt Wave Principle).

As the good book tell us, barrier triangles horizontal line "always occurs on the side the next wave will exceed" (p. 49 Elloitt Wave Principle). This means the break will be to the downside.

If a triangle, it measures 11 handles. This would be measured from the price extreme of where [E] completes. If we assume a 61.8% retrace, this gets us to the 1024 area.

Conveniently, the 3 bar daily projection is 1023.75. Funny how things always seem to work out like that :)

The 4 hour chart gives us a look at where the retracement levels of minute [i] are.

If your bearish, you actually want a deeper retracement process. As I have noted many times in previous posts, the deeper the wave 2 retrace, the more powerful the ensuing wave 3 - generally speaking.

Notice also, we have positive RSI divergence. This should come as no surprise.

I show a double zigzag (ABC-X-ABC) for this entire structure off the July lows. EWI has this labeled as an ABC with an expanding ending diagonal for C. Ummm, if you say so.

It really makes no difference folks. The important thing is recognizing that something of intermediate degree, and possibly primary, importance has occurred.

The monthly view shows how the channel has been left intact.

Secondly, Notice how price eventually held the 20 moving averages on a close basis.

Also, notice the monthly projection has been fulfilled at 1097. Koolio's work told us this would happen 7 months ago! Did you believe it?

Bottom line - I do believe the evidence overwhelmingly supports the case for an intermediate top being in place.

Near-term, I'm expecting the ES to complete the [E] leg of the triangle, then to finish off wave (v) of [i]. We should see a meaningful retrace at that point, that should be very tradable.

If I'm correct in my assessment, wave [ii] will be a "suckers rally." Wave [ii] completion should provide a very nice shorting opportunity, and a place to get rid of your longs.

As always, please do your own due diligence.

Prices basis December contract unless noted.

How's that Margie :)