ES Morning Update November 21st 2022


Looking at the daily chart and weekly this rally is likely to fail soon. While the weekly is just up around the halfway mark (50) on the RSI the daily is getting close to overbought. I believe it can continue to grind up around here all of this week but at some point soon it's likely going to rollover and take another leg down.

Whether or not it makes a lower low or high low I don't know right now. There is already a positive divergence on the weekly RSI with the June low being the lowest low on the RSI and a higher low in October where the market went lower. That positive divergence could be all that is needed for the market to have bottomed, or it might require a second positive divergence.  Meaning we'd make another lower low into December in price but a higher low on the RSI.

Zooming out on an even bigger picture the MACD's on the monthly chart are still pointing down sharply now but since it's a monthly chart it won't be seen in advance when a turn back up happens on it. It might take 2-3 months for it to show up, and the MACD's aren't the best indicator to track.

However, the RSI shows a lower low in October then the June low. Meaning there is NO positive divergence there as the know the price was low too in October. Possibly we need to see a positive divergence here to find a real bottom. Therefore if we do drop hard in December and make a lower low in price the RSI should make a higher low to create that positive divergence. We'd want to see it on the weekly too, if possible, but it won't be require there if it does it on the monthly chart as it's obviously the higher time frame and most powerful chart.

If it did show up on the weekly too then that would be a double positive divergence there and a single one on the monthly, which if that doesn't mark the low nothing will. It's rare to get them on the monthly chart, so if one does appear it will be a powerful signal. The reason they are rare is that one could occur early in the month but get erased late in the month with the rally back up stating and putting in a bottoming tail on that monthly candle that won't close out until the end of the month.

But they more commonly show up on the daily chart, which back at the 2020 bottom you can see that there was multiple positive divergences there. Getting one to show up on a monthly chart isn't likely, but we could see another one on the weekly into December I think. Shorter term I think we do more chopping around this week to keep forming that bull flag.

The longer it fills out the more bulls that will buy it and more bears that give up. That would be fine if the charts weren't close to overbought, but I'm afraid the pop up from the bull flag will end the move.

It could happen late this week or early next week, but again, I don't think it will hold and start the big move up to 5000+ as technicals don't support it. It will really struggle to get through the 4100-4200 wall of resistance, and holding it with overbought charts won't be likely. There's the 200 day moving average there (4069 as of Friday) the falling red trendline (4110 roughly as of today), plus the prior highs of 4158 (9/13), 4202 (8/25) and lastly the 4327 top on 8/16, which is the last connecting point of that falling red trendline.

Lot's of overhead resistance that is likely going to stop this rally I think. That's a big range for it to reach into, so I don't know what level to focus on, but instead will just look at the charts to try and get a feel for when they appear to be out of steam and ready to rollover. My best guess is late this week we get that last pop higher.

Then we start to roll next week into December. I'd love to see 4200 or so as then the fall red trendline would be pierced. It would shake out the last bear and lure in bulls, which would setup the market for a nasty drop into the end of this month and early December. Have a blessed day.

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