ES Morning Update October 2nd 2020

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Yesterday didn't much but confuse both sides all day long with some small moves up and small moves down. Overall it was a pause day I guess as maybe the market was waiting on the outcome of the stimulus vote before making a move? A quick search on the internet shows that it passed, but with the futures currently down it must have been a "buy the rumor, sell the news" event.

I was interested in a short if the SPX reached the 3440 area, (around 3430 on the ES), but it never hit and rolled over without me. Is this the start of the medium wave 2 down or is there still one more move up to over 3400 some to finish off a either a tiny wave 5 up or small wave 5 up? The move down is too deep for any tiny wave I think so it's either the start of medium 2 down or we are still in some smaller degree wave patterns up of medium wave 1 (which again, started at the 3198 ES low).

This move down currently is still a "higher low" then the one on Tuesday, and each move up has made slightly higher highs. Until this changes the market is still likely climbing upward in that medium wave 1, and picking the top won't be easy. If I were SkyNet and want to trick as many traders as possible I'd close today up just slightly under yesterdays high, which would leave both bears and bulls guessing about the weekend. Bears would see the lower high and assume we topped yesterday, did some degree of an A wave down to this mornings low, and rallied into the close for some kind of B wave... leaving C down for Monday.

The bears would probably short the crap out of it (if they have the guts to do it over a weekend?). The bulls would see the same thing and probably sit in cash until Monday. If enough bears got short then they could be squeezed on Monday with a gap up. But if they are afraid to short then a gap down would prevent them from a great entry. For that to happen SkyNet would want to keep the rally going up afterhours to make a slightly higher high to hit the stops on the bears that short the close seeing the slightly lower high and looking for the C wave down.

This market is run on algo's (which I call SkyNet from the Terminator movie) that see the stops on bulls and bears both and loves to hit them before reversing the other direction. Currently the direction is unclear but leaning in favor of the bears currently. I'm still bullish up until my 3635-3680 SPX levels are hit (late October to as late as mid-December) but this current short term picture is hard to figure out.

I'm 50/50 on this being the A wave down of an ABC pattern for medium wave 2 down, so odds aren't good enough for me to play it. Assuming that support holds here at the open (which is common) then later today or Monday we should go back up and it will be then that the market should show it's hand.

Will it be a slight lower high to suggest an A down and B up inside medium 2 down is in play, or will it make a higher high and run for resistance at 3440 SPX to squeeze the last bear and complete some small wave 5 up to end medium wave 1 up? Have a great weekend.

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