ES Morning Update October 27th 2021


Higher we go it seems. Whenever the market gets close to some big even number level, that's never yet been hit, it tends to either stop shy of it by 10-20 points and turn or go through it 10-20 points and turn. The ES hit 4590 yesterday and turned with the SPX hitting 4598, so it's possible that it's done but the lack of of selling this morning makes me think they plan to take out that even number of 4600 and go 10-20 points over it... then turn down.

This is truly NOT healthy and reminds me of the rally up into the September 2nd, 2020... which of course was the top of the Extra Large Wave 1 up (ELW1) from the March lows and the start of the 10% correction for Extra Large Wave 2 down (ELW2). Yesterdays closing candle put in a DOJI (spinning top) pattern, which is bearish of course, but it still might not have been the high.

I say that because the longer this drags out and higher it goes the stronger the odds of a surprise big drop day appearing out of nowhere with a gap down to start it off with... basically similar to 9/3/20. This market is like a rubber band that is currently overstretched to the upside and the snapback is going to be nasty when it happens.

On this daily chart you can see there's still room to go higher on the RSI and MACD's, as when you look back at 9/2/20 you can see the RSI put in its highest level (82.39) and this morning it's only at 67.21... still quite a ways from "very overbought". But that doesn't mean it has to hit that prior level and I'd be shocked if it did. No, it should be another lower high to keep the divergence going between the RSI and the price level. You'll notice the next major peak on the RSI was on 4/16/21 with a "lower high" of 75.60, and the market was way higher of course. This pattern should continue with the market making higher highs and the RSI low highs.

This is why I think it's possible that we go up higher again today to get even more extreme levels and push this RSI up higher too... like maybe to 69 or 70? With the highest reading of 82 and the 75 you have a 7 point difference, and from 75 to the current reading of 67 you have an 8 point difference... so the market is likely very close now to that turn.

Above is a chart I drew yesterday showing a potential forecast. But that wave 4 projected low around 4450 might not be low enough since the market refuses to pullback naturally to reset... meaning that rubber band affect could drop it lower toward 4400 or so due to the momentum from the expected drop coming. Weirdly as this sounds I still think it comes this week, but it could carry over into next Monday before the low it put in... just that the biggest part of the move should happen by this Friday. I know that there is another FOMC meeting next week on Tuesday and Wednesday but the market already knows that the Fed is going to start Tapering soon, so you can't just blindly short on Wednesday prior to the meeting thinking it's going to fall off a cliff from what is said.

The market knows everything in advance and front runs all news. We should see the this pullback happen before that meeting, and 80% of the drop should finish this week, with possibly some choppy action next Monday and Tuesday in front of the meeting to finish the down move. Then after the meeting we go back up again to squeeze the bears short into the meeting think the market is going to tank after the Taper announcement happens.

The opposite is what should happen as traders will front run that news and bottom prior to the meeting. I've seen it happen over and over again, and this time is no different. How much of a pullback we get is unknown but I can speculate using technical analysis, trendlines, support zones and Elliottwave... and FP's too, but the timing of "when" one is going to be hit is very hard.

I still think think we'll hit the fake print on the QQQ of 360.27 before the end of this year, but that might not happen until late November or early December. Basically I think we need to finish the first 5 wave series up from the 4260 lows first, and this coming pullback will only be the wave 4 down in that move up. Do the wave 5 up into the monthly options expiration in November and then I think we could drop to the FP (around 4366 on the ES). After that we rip the face off the market the rest of the year. Have a blessed day.

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