There are three alternates right now in the ES. The first two are identical in their very near term implications but very different in their medium term outcomes.
On the medium term, Alternate #1 outlines a 3-3-5 flat type bear market structure dating back to the top of last May, with the "A" wave complete at the early October low and the "B" wave in progress. The "B" wave should top at or near the May highs over the coming weeks and usher in some pretty serious "C" wave selling. A likely target for that "C" wave would be the .618 retracement level of the Mar '09 to May '11 bull market at ES 936.
Alternate #1
Alternate #2 also has a medium term 3-3-5 flat type bear market, but that flat is an irregular flat that is marked as starting at the highs of last February and concluding at the October low. In this count the ES has completed an Intermediate Wave 1 & 2 off that low and is in the early stages of Intermediate W3. The expectation in this alternate is for a strong and extended bull market from here forward.
Alternate #2
Alternate #3 is near term bearish and the most intriguing of the three. In this count the pattern from the May high into the October low is the 1st 5-3-5 zig-zag in what will eventually be a double (or triple) zig-zag type bear market. Since the October low the ES is labeled as having formed a triangle type "X" wave with the "E" wave of that structure complete in last week's trading. If correct, that would mark the conclusion of the "X" wave and the ES should immediately tip over into the 1st leg of the 2nd zig-zag of the bear market. A likely eventual target here is the same as in Alternate #1: ES 936.
Alternate #3
Alternate #3 has the edge as of this moment due to the situation at the end of trading last Friday. At that point there was a sell signal in effect on the ES/SPX under the Trendline/Oscillator system. Further, the Vindicator Buy/Sell has been oscillating, which it tends to do at market turns, with the Sell line close to crossing above the Buy line. A cross of the Sell above the Buy would be an initial confirmation of a turn down.
The expectation was for a flat or triangle type correction in the ES, this looks like a triangle developing - and the lack of bull or bear conviction fits that scenario pretty well. So the most likely path is more choppy and uneventful action for the next few days or so followed by a shot up towards the highs of last May.
The ending diagonal proposed in yesterday's post is unfolding close to what was anticipated. Target for the ES remains in the 1326.25 to 1331.25 area.
With the price action last night and today the ES appears to be forming an ending diagonal for Minute W5. Target for Minute W5 and thus Minor W3 is 1326.25 to 1331.25, and a top should be achieved some time in the next two days.
ES 1368.75 was the high of last May and the ES is getting within spitting distance of that mark. There are two most possible alternates medium term IMHO. The first looks for a very significant top in the area of those May highs followed by a deep sell off, the second envisions an energizer bunny market. Doesn't seem to be a lot standing in the way of this market at this moment in time, so the bunny might be the correct read. But surprises are the way of the world, so hang loose.
The ES has clearly been losing momentum since the blast off from the low of Dec 19. Prices were essentially flat this week except for the gap up opening of Tuesday. So right now Alternate #3 below would seem to be the most likely outcome.
