In my post yesterday Thursday, 3/3/16 – Entering Inflection Zone at 1990ES?, I mentioned that “1995-2010 is still the zone I see resistance in.”
Today, we got into that resistance zone first with the 8:30am morning report over 200 towards 2003, then again in the afternoon with a high of 2007.5.
From there, the market turned down, towards 1995.
Crazy to think that just three weeks ago – on February 11 (bottom) and February 12, 2016 (Friday before President’s Day Weekend), we were just coming off of the low of 1802.5. Now we hit 2007.5 — an almost 200 point gain in 3 weeks.
While I could be wrong as it has been incredibly difficult to make sense of each twist and turn of the market in the past few days until I sat down and really looked at pattern from multiple angles, I see enough patterns in place for that to be a local top.
I could be wrong and it does make me uncomfortable when I check Elliott Wave charts done by other people and everybody is looking higher like 2020 and 2030 before any kind of correction, but here are my reasons for 2007.5:
This is the biggest non-stop creation of green candles (200 pt ES rally) in a long time. The biggest rally in recent history was October 2015 – when we rallied from 1850 to 2100 – a 250 point rally.
That said, I’m not certain that we are entering a wave iii down. In fact, the possibility of us continuing to rally to new highs in a 5th wave does exist that I have to be open to. Right now, we are at an inflection point — which means the set up is there for a 3rd wave down –but if that does not happen and we start reversing up in a sustained manner, it could mean that we may be going up to new highs in a final 5th wave, before an even bigger crash happens.
So we are both set up for a 3rd wave down as well as a 5th wave to new highs — so this is the dilemma of inflections. Even if we do go down, I don’t think it will be crash. From a long-term perspective, it would actually look better if we rally to new highs and for the recent drop to 1800 to basically be the 4th wave A-B-C with the bottom being marked by that oil announcement that Thursday on February 11.
But I have to continually adapt and adjust based on each day’s market data. So we will have to see. It’s very possible that we only go down a little bit and continue the rally. So I remain open to all possibilities and will let the market give me more clues.
Yesterday I was not sure how to count it – it turns out the yellow 5 should be an “i” wave as a diagonal extension as illustrated below.
The green wave 1 – that was when i was expecting further upside – -but instead it consolidated back towards 1977, which is not what I was expecting — opening the door for a diagonal formation. If a diagonal is how the market wants to play this out, then it’s possible the Friday 8:30am report was the green wave 3, followed by 4 retrace, and then a overthrow 5th wave .
We have now hit 2007.5 and 2003 within the 1995-2010 region I’ve been pointing out – and it serves as resistance. I wasn’t sure whether we would actually get all the way up here based on the chart pattern – but it turns out it did happen. This region has served as multiple support zones back in November 2015 and December 2015 and has previously served as resistance back in September 2015. I would suspect we should have a reaction off of this region.
The russell ended up going to 1087 and did react by some 10 points down from it towards 1077. Will have to see how it goes. This has been a 150 pt TF Russell futures rally from 938 to 1087 without much of a retrace. This has been the quickest Russell rally in recent history in such a short amount of time — which is typical of a wave ii rally retrace in a bear market — but it could also be the start of a 5th wave up. Hence, the inflection dilemma at this point.