From the looks of it, the 1 and a half day drop may be all we get in the indices. Clearly the dips were bought heavily. We got the gap fill down in the S&P and then a little bit more followed by a truncated 5th wave strong reversal. I wish that bottom happened during market hours – it all happened early in the morning and the reversal was already on its way when the market opened.
If there is to be a bear move, it will have to happen in the next 24 hours. If that does not happen, we are currently on track for multiple green candles in a row with the potential of bringing us to new all time highs by the end of next week into Memorial weekend. That would mean we are already on our way towards 2500 ES.
Support is in the 2375-2380 region. If we hold these levels through Monday – then we are likely going up rather than down.
The uber bullish count is the pink – with the selloff on Friday as wave 2 drop. The less bullish would be the drop as a wave ‘a’ – followed by a b-wave rally to 2386 ES – and then a pullback to 2374 ES before we go towards 2400 ES.
Major resistance was at the 2375 ES level – which was easily cleared at the open on Friday – not a bearish sign.
Now, 2375 ES is support.
The previous chart – suggested a bottom 5 waves was complete, but it was not. It turns out the overnight did test the 2366 ES level mentioned – but then we dropped to new lows early in the morning and then reversed violently from there. So my count was off by a degree.
The leading diagonal from May 8 to May 11 – really was the big clue for the big one and a half day drop — I kept viewing that diagonal in 4th wave position – but actually that was wave A down – followed by a 5-wave B-wave towards 2404 – and then the C-wave drop down.
The question now is whether that C-wave is complete or not.
While the Russell technically held resistance at the 1372 level, it was stronger than I expected on the rebound. The b-wave consolidation between May 18 and 19 was higher than I would have liked to see for a bearish move. While Russell is the weakest of the indices, it did bottom in a truncated 5th wave in the same manner that the Dow, S&P, and Nasdaq bottomed with truncated 5th waves.
While a potential bullish pattern exists in silver, from a micro perspective, I have some concerns about the diagonal that just formed. Either that’s a leading diagonal to the downside (bearish) – or an ending diagonal, leading to a strong reversal .
With the expanding diagonal – the question now is whether that’s leading or ending. Any move below 16.4 at this point would lead to a sharp drop. A sharp rise is also possible, but 17.00 must be cleared strongly.
We saw what the diagonal structure in the S&P did — there was a rally back to where the diagonal began and then a strong wave down. If the same thing happens in silver – -we would get a rally to 17 and then a strong pullback. However, ability to clear 17 strongly would suggest the exact opposite.
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