ES Morning Update October 20th 2020


Yesterday was a prime example of how tricky these short term moves are. I thought we might continue up to retest that 3550 area top last week but instead it chopped around some in the morning to hold the opening gap up and then rolled over to go negative with a decent sized drop the last half the day. It fell through the rising purple trendline and is still under it this morning even with the futures being up some. All the side way action is making a nice bear flag as well, so the bull need to get going asap to kill that bearish setup and get back over that purple trendline.

Otherwise another drop is likely. Currently it looks like high last Friday around 3500 was the small B wave up top with the A bottom the day before around 3430 or so. Of course the start of the small A down was the 10/12 high of 3541 ES (3549.85 SPX). So, it looks like we are back on my first wave count with a small C down happening early this week.

Likely it's subdividing into 5 tiny waves and the drop yesterday was the tiny 1 wave down, and it looks like this morning we are in the tiny 2 wave up. With the moving averages all rolling over and crossing, as well as the price level below the rising purple trendline, I have to think this count is probably right. It means that today we should see a nasty tiny wave 3 down inside small C of medium wave 2 down.

Then Wednesday would be a tiny 4 and 5 probably to end small C and end medium wave 2 down. The 3300 level (and even a pierce of it) could still get hit before this is all finished. Bulls only hope is to negate the bear flag and get back over that purple trendline today... like before the open if possible. But if this wave pattern plays out like it should then the bottom should be in for medium wave 2 down by this Wednesday or Thursday at that latest.

Then up into the election for medium wave 3 up. Again, these shorter term wave counts are very hard to figure out as the market is very manipulated on the short term. They can't really affect the big picture as much (some... sure, but not a lot), which is that a final top over 3600 SPX is still likely for mid-late November. Then a huge drop to 2000 SPX should follow into the first quarter of 2021. Have a blessed day.