ES Morning Update December 23rd 2022

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Another nasty drop yesterday but it did recover into the close about half of it. The market never makes it easy to figure out but I think it's finished on the downside for a few days and should rally back up today and Monday at least. The level for the bulls to recapture is again the double top around 4100 and this coming week is the best chance for them to do it. If they fail then odds will shift in favor of the bears big time as January is usually bearish and my bearish wave count will align up nicely with a wave 3 down next month.

I did a chart of the shorter term yesterday and posted in the chatroom. I posted that I thought the drop was an Extra Tiny Wave 5 down and that it ended at the lows to complete Tiny Wave 1 down. The rally up into the close is the start of Tiny Wave 2, which will likely be an ABC move, but doesn't have too of course.

Time-wise I think it will finish by earn next week as I don't think it will drag out from yesterday all the way to next Friday as that's too much time I believe. The target high might be up to 4050 but it's really just a guess. I'll just say that if Mr. Market wants to trick the most traders it would get within a hair of the 4100 prior tops to make everyone bullish again. You can see that if you get that high now you will be through the falling red trendline of resistance that has keep a lid on every rally all year long, so piercing through it on the coming rally would make most traders think the bottom is in, but bulls must clear it good and hold it, which won't be easy with the SPX Cash running just under 30 point lower then the ES Futures.

You see those prior tops on the SPX are 4100.51 and 4100.96, as that fast squeeze up to 4180 on the ES from the CPI number was before the open for the cash, so it wasn't seen there. Meaning the SPX has to take out 4100 zone cleanly and hold into the close without ended on extremely overbought charts so it can follow through higher the next day and not reverse hard.

That's not going to be easy with the close on it at 3822.39 yesterday. Remember, bulls basically just have next week and maybe the first day or two in January before the Seasonality shifts to bearish.

If they had 2-3 weeks to make this move I think they could do it and keep the charts from getting stretched to extremes, but to do it all in one week basically will overheat the RSI for sure I think. And that will greatly reduce to odds that it can hold any move over 4100 as we go into a bearish period next month.

All in all, with all the evidence and facts out there with the Fed wanting the market down, January being a bearish month, and technicals that just don't support a strong multi-month rally I have to lean with the super bearish wave count I did this week as most likely being accurate right now.

Again, I'd love to see a rally up to new all time highs and beyond as it's much easier to trade bullish markets then bearish ones (at least for me it is), but I don't see it right now. I just see a nice bounce in play that will setup another short next week most likely. Have a Merry Christmas. Happy Birthday Jesus.

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