Last week was quite nasty with the trade wars riveting the markets.
At first Trump said that he would put strong measures against China – then there was news that it wasn’t as bad as expected — that sparked the c-wave of 4th wave rally towards 2745 ES.
But then it dropped to new lows after that towards 2700 ES.
Then there was a bounce once more to 2745 ES — and then a selloff into the close on Friday.
I believe what we have formed is an A-B-1-2-3-4-5 pattern followed by a wave 1 bounce and then a wave 2 drop.
S&P formed an A-B-1-2-3-4-5 pattern.
Last week’s rally was a wave 1 – the wave 2 drop happened into the close on Friday. I believe Sunday night should see a bit further below – before we stage a rally into the 4th of July during Wednesday.
Trading will be closed on Wednesday – so we should be consolidating during that time.
My guess is this wave 2 drop should bring us down to 2716 ES or 2712 ES before it reverses.
If the following rally is not strong — then it’s possible a 5th wave up would take us to 2810 ES – and then we drop from there.
The Dow has experienced an epic continuous decline led by the financials. The strength a financials and Dow will determine whether the rest of the market can move up. Otherwise, we could get a dead cat bounce followed by a drop in August.
The Nasdaq bounce has been a bit stronger than the S&P.
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