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Last Friday, we initiated a bullish trade when ES was around 1903/1904. It closed around 1913 last Friday. Details are in the Episode 9: What is Overnight and Weekend Trading Risk? Max Profit Trade for Week of February 19, 2016 blog entry.
Today’s S&P500 Hourly Chart
Today, the ES went over 1940 from the low of 1899 just one trading ago last Friday. Our trade-of-the-week is close to max profit and it’s only Monday.
So far we have a massive A wave rally from 1802 to 1933. Then a B wave retrace to 1899. Now we are in what might be the final C-wave since we broke the prior high of 1933 overnight. Actually during the day, there wasn’t must net movement up because it mostly went up and back down at the close towards 1935.
This is typically what happens during a rally — most of the rally happens during non-market hours. It’s as if the market knows to screw people over who close their positions at the close. I do remember seeing market studies that said even though the typical SPY return is something like 10% a year — the majority of those gains (>5%) actually happened overnight — and they happened in just a few select days.
Today’s S&P500 5 min Chart (Zoomed In)
Today the market opened at the bottom of the 4th wave and then proceded with a quick 5th wave up. But the 5th wave did not result in a typical wave 2 down movement. Instead, there was consolidation with a b-wave high — this signals the potential for an extension count labeled in red.
After the close, there was a selloff — so it appears the “c/ext2” wave went down towards 1935. If there is an extension, then the market should reverse back up tonight. Let’s see how it plays out.
Regardless of where the market goes, our trade-the-week is close to max profit. Still, we are inclined to see new highs soon.
Here’s what the Daily Chart looks like now:
