ES Morning Update June 22nd 2018

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I spoke about a possibly "inverted head and shoulders" pattern setting up yesterday and that the premarket pullback to the upper trendline of the falling channel was likely some kind of wave 2 down, whereas the wave 1 up started at Tuesdays' low. Well, that wave 2 down didn't stop at that upper falling trendline of support and reverse into a wave 3 up but instead busted through it yesterday and keep falling until near the close of the day. Today we see it back up off that low to almost about the same level as the open was at when the down move of the wave 2 continued yesterday.

However I'm started to question my wave count as at this point it's still not feeling like a wave 3 up. Maybe that's because I feel the wave 2 down yesterday was deeper then I expected? I don't know, but if this is a wave 3 up it should continue grinding higher today and not give back very much. On the flip side if it reverses back down then the bulls could be in for a nasty shakeout as I'd likely have gotten the wave count wrong at that point as the move up from the 6/19 low of 2735 might not be a wave 1 up at all but a B wave up... meaning the top on 6/20 of 2783 was the start of a C wave down, which yesterday would have then put in the low of the wave 1 down of that C down and today's' move up would be the wave 2 of that C down.

That leaves a nasty wave 3 down (and 4 up and 5 down) yet to come to complete that C down. This is a very possible outcome if we don't see this morning rally continue to go up all day and take out that 2783 high to suggest that we are in a wave 3 up as the first wave count I've discussed suggests. That scenario two (my second wave count I've spoke of) is the scary one for the bulls and I just don't know which scenario is accurate? However, considering today is a Friday I don't think they will roll it over and drop it hard into that second scenario today.

Odds are good that we'll hold these gains to close out this week... meaning I don't see that sharp drop happening today or the run up to take out the 2783 high as scenario one suggests. I think it's going to be left as "unknown" as this week closes out and we'll have to re-evaluate next Monday where we are at. Overall though I still feel like we need that final "stop run" on the bears over the 2800 level by a few points before heading south hard.

So that leans me more bullish into early next week then bearish, with the thoughts that at some point we'll make that move over 2800 to run those stops. I don't know how high of course? I've been suggesting 2820-2840 but honestly that's just a "best guess", as it will really just be determined by how many stops are overhead of that level that SkyNet decides to run. Maybe it only hits 2810... don't know? We'll cross that bridge when we get there I guess. Have a great weekend.