Today I want to look at the ES daily chart flipped upside down. You can see right off the bat how the futures have followed the falling trendline in yellow. You can invert any chart with the Think or Swim platform by putting a "negative" sign in front of the symbol. I sometimes find it interesting to look at it this way as it gives me a different perspective. I can see that all the recent pullbacks since the January high and big drop seems to find support around the green falling trendline... which is pointing to the mid-2700's right now. So over the coming month of October I do expect a pullback into that trendline. The top for now is likely in and won't be taken out until later this year. Of course that trendline is rising and won't be in the mid-2700's by the time this pullback bottoms.
My guess is that we'll be bottoming in mid to late October and then a strong run up again for a new all time high into the end of the year. Short term though we will probably chop around until the FOMC meeting is over with this Wednesday at 2pm EST, with a slightly upward bias (meaning the low yesterday is likely "the low" until after the meeting). There's a gap on the SPX around 2930 that will likely be filled before the next move down, which will likely go to the 2850-2860's area to end the first ABC move down. After that we'll have to wait and see. It should not be some scary drop in front of the midterm elections. The drop in October will likely be a chop one that doesn't scare the public into "crash mode", but deep enough to get very oversold (like the high 2700's) so a strong year end rally can start. If this pullback is allowed then a year end rally to 3100-3200 SPX is very possible.
If it's not allowed and they try to grind higher this week and into next week then they will be lucky to touch 3000 in my opinion... and worst, they will be susceptible for a crash. I'm sure the Republicans don't want that so a controlled pullback seems much more likely I believe. Yesterday in the chatroom I announced that I sold my shorts and went to cash as I expected chop until the Fed meeting was over with. I expect to re-enter my shorts after the meeting, probably on Thursday or Friday. Gap fill could happen today from the looks of the futures but that doesn't mean I'd just blindly go short again. There's still likely more chop until after the meeting and a double top isn't out of the question. I patiently wait...
