The markets dropped right back into the 2340 ES support region and bounced back strongly to close at 2355 ES.
The drop in the Russell was particularly pronounced as the Russell had a recent strong move. From 1390 resistance down to 1365 within a few hours. Good thing we cashed out our IWM calls last Thursday – even though we may have exited for profit slightly early, we were able to avoid the drop today. With the Russell below where we exited, this could also represent a buying opportunity.
For a minute, it looked like 2365 resistance wouldn’t hold up – but right at the close last Friday, the market pulled back.
Today’s downside follow through represents what could be a wave 2 drop with a potential 3rd wave or C-wave of B going up. I’m expecting the next resistance level above 2370 to be tested before potentially turning back down.
Going forward, if we struggle in the upper 2350s – then we could turn back down to the 2346/2348 region before moving back up.
Otherwise, we could consolidate in this region and just head straight towards the next resistance region above 2370 – around 2374 ES.
The prior chart had us completing downside at the 2320 ES region. We mentioned we bought near 2320 ES and the market then went straight up into resistance in the 2365 ES region.
In both the S&P and Nasdaq, we have 5 waves up and 3 waves down – the setup is there for a potentially bullish move – but the market must follow through if this is to happen.
The strong bounce after what looks to be the c-wave of a wave 2 drop this morning —- such a strong bounce is usually bullish in nature – unless we stop at resistance and struggle to move through in the next day.
Meanwhile, silver also looks to be coiling up right under resistance in the 18.3 region. In the past 4 trading days, silver has dipped into the 18.05 region multiple times – but has struggled at the 18.3 mark multiple times. I would say silver must follow through in the next 24 hours or else it may turn back down below 18. The set up is there, so let’s see if it walks through or not.
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