ES Morning Update May 3rd 2023


The FOMC was full of wild swings up and down intraday the hour afterwards, but by the close the real direction appeared, which was down. This morning the RSI on the 6 hour chart is pretty close to oversold, and with the market showing a fairly clean wave structure down I suspect we bottom today to end the A wave and start the B up into next week.

Inside the A down I can see 5 waves to the low afterhours yesterday. Then some A up into the into early this morning and we are likely in the B down right now. So, sometime after the open I think we'll bottom and start a C up.

However, while it's common for B waves to only have 3 waves inside them (an ABC) it's possible that the A,B and C subdivide in 5,3, and 5 waves. Meaning that the A part up just started and we have done the wave 1 up and 2 down into the open right now. That leaves the 3 up today, then 4 and 5 just to complete the A wave of the B up (which should last into mid-late next week).

Why do I think this B up will have the ABC waves up inside it subdivide into 5,3, and 5 you ask? Because of "time" that is needed to get overbought again on the RSI of the 6hr chart. I think it will drag out for 3-5 days to frustrate the most bears wanting to short now.

Those same bears missed the A down to the lows yesterday, which only took 2 days from the May 1st high. So they will likely drag out the B up to keep them from catching the C down, which should bottom into the end of May and of course have 5 waves inside it. It's the one I think will hit the rising light blue trendline around 4000 or so.

Alright, so that's the longer term picture. For today I think we bottom early on for what is likely a wave 2 down inside an A up, of the B up that should last into late next week. That means we should do a wave 3 up most of today and into the close. Afterhours we have Apple earnings, which might produce a small pullback for wave 4 in the afterhours session.

But by the open on Friday I think any pullback from it will be erased and we'll see the wave 5 up though midday (probably) to complete the 5th wave inside A up. Into to early next week we do the ABC down for the B wave (still inside a B up) and mid-late next week we do the 5 waves up for the C up to finish the B up. All of the wave counts are just created solely on the fact that I think we need until mid-late next week for the short term chart to get overbought enough to finish the bounce move up, which I think will hit the FP on the SPY.

So.... don't get married to the wave counts. Just focus on "time" as that's the most important factor here. If the charts get overbought early next week (and the FP on the SPY is hit) then I'll be looking for a short. I can go back and recount the waves I'm sure and they will end up being in some proper count. Whether that is just a fast and clean ABC up for the B wave or a 5,3,5 for the ABC to finish the B isn't important.

It's about taking the highest odds trade for me and I think that's a strong move up today shortly after the open for a possible wave 3 of some degree. That's all I see for now. Have a blessed day.

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