In the previous post Panic into Good Friday, I presented the case for an immediate reversal base on the possibility of an “ending diagonal” pattern. At the time, we had concerns of US getting involved with Nuclear testing – and that North Korea would be testing something on that Saturday. Volatility was elevated and we took that opportunity to enter a small short on volatility.
Well, that nuclear test failed as the missile fell apart during launch. VIX has dropped and the market has rallied.
At the time, ES was trading at 2327.5 – now we are at 2345. I was initially looking for a move to 2350 and then a pullback to just below 2340 ES, but instead, we only got to 2345 ES and then pulled back to 2330 ES — before we had the brief rally to 2358 ES.
Based on Friday’s pullback down to 2340 ES – creating an overlapping 4th wave into wave 1 territory, I do not expect the next immediate move to go beyond 2362ES. Perhaps a spike into that region would result in push back to 2337 ES for a test. If that fails, then that would be bearish for a move below 2330. But my expectation is for that level to hold up for the next few days.
We were mostly flat from the option trades. While our IWM calls were up, they were offset by the SPY calls. However, our VXX short was timed well – so we were are riding that somewhat bumpy wave at the moment.
The April 19 high was higher than I wanted and the rebound rally overnight into April 20 was not as strong as I would have liked to see. Yet, the market managed to follow through on the bullish setup during the market hours and moved towards 2360 ES.
Lately, there have been lots of fakeouts in both directions – typical in a B-wave of a 4th wave. The wave 4 drop on April 21 was deeper than I would have liked to see – indicating that the next rally will likely fail at resistance marked in pink.
On April 3 – we had a selloff into Good Friday weekend – which resulted in reversal shortly before the open on the following Monday.
If 2323 ES is the b-wave low, then we SHOULD see some kind of c-wave that goes above wave a – which is at 2374 ES.
However, based on the pattern so far, I have doubts that we will be able to make it that high in the immediate term.
The Russell had wave 4 hold just barely technically not overlapping wave 1 territory to invalidate the continued bullish setup. So it seems the Russell is a bit more bullish than the S&P.
The Russell has been strong since the Good Friday weekend lows of 1342 TF — now at 1379 TF
Like the Russell, the Nasdaq also did not overlap into wave 1 territory. However, I see potential resistance in the 5467 NQ region marked in pink below.
Previously, we posted this chart in silver – an we expected a pullback from the 18.6 region towards the 18.3 region.
Well, we did spike over 18.6 and then pulled back.
However, the pullback went past 18.3 – — it even even retraced the entire rally – going back below 17.8. I can see potentially 5 waves down into the 17.8 region. If that’s the case, then that would be another typical A-B mountain consolidation pattern between April 10- 21. So how strong silver is in the next week will determine if it has any juice to move to the upside – assuming the 17.8 region holds as support.
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