ES Morning Update May 21st 2018


NOTE:  I'm unable to write my notes on the chart this morning as for some strange reason Jing keeps crashing and that's the software I use to make the screenshot with text boxes.  But I was able to get a screenshot using my pen tablet software called EpicPen but unfortunately there's no way to type text in boxes with it.  It's just a hand writing software that requires the pen to write with.  Naturally I'm not going to even try to hand write all my notes on the screen.  This will be the new "norm" until I can figure out how to get Jing back working or some other software that allows text boxes.

On to this mornings' update..

Looks like we are gaping up this morning as the market likes the tariff news between the US and China... at least that's the most likely thing to blame it on. In reality it was really more based on short term charts being more toward oversold levels versus overbought. Overall the charts are mixed when looking at all time frames, but getting more toward overbought medium term (days to weeks). Longer term (weeks to months) we are coming down from very overbought to neutral so it could dip into oversold this summer if we have a drop to the 2500's or so.

For today though I'm looking for this move up to exhaust itself by the close, which could (should) lead to a pullback starting as early as Tuesday. It might be choppy during the week though as the pullback does it's dance up and down to shake out the weak hands (in Elliottwave it would be the multiple waves 1 and 2 until a 3 of C down starts). The move since the high on 5/14 looks like an A wave down to 2700 on the 15th and we are now in a choppy B wave up of some degree.

This suggests a lower high today then the 2740 start of the A wave down. If it completes today by the close then I'd expect a 5 wave move down to make the C wave, with a downside target around 2655-2675... basically somewhere where the falling orange trendline hits to the rising blue trendline and horizontal green trendline. The alternate EW count would be that we make a higher high (preferred really as I think that will increase the odds on the down move). If so, then the 2740 to 2700 move was some kind of wave 4 down and the move up would be the 5th wave to end the pattern.

Not sure on the smaller wave counts inside that 5th wave but they commonly breakdown into 5 waves. So hopefully we can count them cleanly if we rally up all day to 2750 or more? This wave count would be preferred by me as it would make the drop larger as the downside targets will still be the same no matter what wave count happens. Therefore, today is an important day for the bears with either wave count.

Odds favor a down move starting tomorrow with either count but the "higher high" is the one with the best odds. As far as the down move... it could all happen this week by Friday? Hard too say for sure but it's possible. Going into the end of the month is usually where you'll see this weakness happen... at least for the month of May. So possibly this gets dragged out into next week, but that's the overall plan that I will happen.