The markets seemed to crash out of no news besides it being October. The Fed raised interest rates on Sep 26 — but even the next few days after that, the market floated higher towards 2944 ES before pulling back.
During the pullback, there was no significant bounce at all – and so the Wednesday after the Fed raised interest rates again – the market puked from lower levels. The biggest hint was perhaps the Russell chart that was a precursor of what was to come for S&P and Nasdaq.
Here’s a chart analysis.
The Fed raised interest rates on September 26 Wednesday -there was an initial spike and then sell off and then rally into the close. Overnight it pulled back but did not make a new low.
From that 2907 ES level, it formed a 5 wave ending diagonal pattern where the 3 = 2942 ES and the 5 = 2944.75 ES
That 5 top was made at 10am on October 3 Wednesday @ 10am — effectively 1 week after the Fed announcement.
From there the market dropped without any significant bounce. So for the rest of that Wednesday – it sold into the close and continued selling overnight. Even the next morning open bounce was miniscule and then on Thursday it continued selling with 2910 ES as resistance.
When we exceed the prior 4th wave support at 2872 ES on October 8, it was followed by a rally into the close that following Monday into the close.
It looked like the market finally found a bottom, but then overnight pulled back the next morning — and at open, it tried one attempt towards what I thought would be that 2908 ES resistance zone, but instead, it only got to 2899 ES and closed around 2890 ES.
Hourly ES Chart
For the entire night it did not bounce, staying at 2890 ES — which was the major clue that the market would puke.
I was hoping for 2908ES, but instead there was no bounce and instead the market proceeded to drop into the open around 2875 ES and accelerate down to 2837 ES within by noon.
I thought 2843 ES would be the next support — an it spent maybe just 1 or 2 hours there, but then just couldn’t get above 2850 ES from the morning drop from 2875 ES.
Failure to get back above 2850 in those few hours, meant the market wanted lower – and so the market continued lower into the close and further towards around 6- 8pm ES at 2750 ES.
From this low of 2750 ES, we formed an A-B mountain overnight — climbing from the post close lows back towards the close region of 2780 ES before coming back down to 2750-2755ES.
Then it staged a rally after the market open the next day and reached towards 2800 ES but then failed.
However, what followed was NOT a 5 wave move but instead a 3 wave move to new lows – followed by a massive 4th wave rebound and a truncated 5th wave low — indicating a likely bottom.
The 3rd wave bottom was at 2712.25 — and the 4th wave rebound pushed it all the way to 2765 ES – before going back down towards 2727 ES at the close.
Immediately after the 4pm close the market rallied huge and continued overnight towards 2785 ES — that’s a 55 point ES rally after the 4pm close.
The next day the market retested that 4pm close gap value of 2727 ES cutting shy at 2732 ES — and then from there rallied in the last 2 hours of Friday into the close.
We now sit at 2772 ES over the weekend.
It turns out that 2712 low matched up with the 2715 low of the break up candle on July 5 — that began the summary rally. So we effectively went all the way back there, tested that low and then rebounded.
In terms of what’s next, I’m expecting to see a rally over 2800 ES to the 2810 ES to 2820 ES region
From there we can drop back down to 2740 ES – the same place the market was 2 hours before the Friday rally 2 hours before the close starting at 2pm EST.
So I believe the 2740 ES level will be retested once more
I noticed this sideways C-wave pattern a few times prior to the decline – could be some significance.
In terms of what happens next, it appears Nasdaq NQ could rally over 7300 NQ — targeting 7350 NQ region.
From there, if we turn back down, I’m expectng a 300 point drop from 7350 NQ to 7050 NQ — effectively the low 2 hours before the close on Friday.
That’s my best guess at the moment.
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