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Saturday, August 19, 2017

Saturday, 8/19/17 update

If you're a bear (count me in that camp) your resolve was tested this last week with the strong ramp up that started the prior Friday and topped on Wednesday.  But Thursday brought confirmation of that bearish posture and the idea that the 4th wave (Intermediate W4) of a bull sequence that commenced in Feb, 2016 is underway.

Thus far we've had 3 waves since the Aug 8th top through Friday's low - a 5 wave impulse into the low of Aug 11 followed by a 3 wave correction into Wednesday morning's high and thence another 5 wave impulse into Friday's low.  This sequence is either an a-b-c zig-zag with Friday's low either the completion of the "c" leg or the bottom of the 1st wave of the "c" leg OR it's waves 1, 2 & 3 (in progress) of a much larger "a" wave off the Aug 8th top.  It's difficult to say which possibility is unfolding, but there are some considerations which point to the likelihood that there's more bear activity yet to occur.  First consideration is the depth and duration of Inter W2 (which occurred in June of last year) which lasted three weeks and dropped roughly 140 points in the ES.  So far we're less than 2 weeks and roughly 70 points from the Aug 8 top.  Second is the position of some longer term momentum indicators which have not yet reached the "oversold" territory normally seen at IT bottoms.  However, it's important to note that there are enough waves in place for Inter W4 to be complete at Friday's low, so from an EW standpoint it would be acceptable to have that as the termination of Inter W4.  The market was oversold on a short term basis at Friday's low so the resulting bounce was no surprise, and it's likely that the move up from that low has more to go.  If the rally gather's steam and tops the ES 2474 high of Wednesday in an impulsive fashion then the odds that Inter W4 is complete mount quite a bit.

If the sell off resumes there are two areas of potential chart support to watch as potential bottoms for Inter W4: ES 2400 and below that ES 2317-2322.

NOTE: dotted lines show potential EW structures and are not necessarily accurate price/time forecasts   
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