It is pretty clear that the bounce off of the Dec lows is a 3-wave structure. From our price structure rules, what do we know about where wave 3’s terminate? They typically terminate at around the 1.272x extension target drawn off of wave 2 … that would make our target zone around 7016.50 for the NQ contract.
What about a time window? Typically wave 3’s will be equal to 50% -61.8% of the time taken to complete wave 2’s … that would make our window from 10pm last night up until 2am tonight.
The high made today in the NQ was made 9:34am and it was at 7038.75 … so we have made what looks like a complete 3 wave structure at around the typical price target in the time window that would normally occur – what about the actual look of the final 3rd wave? That typically will also form a smaller 3-wave price structure.
So it appears to me that price has completed a smaller 3-wave price structure in the final bigger wave 3 … there is nothing else that I would normally expect to see when looking for a logical place for resistance to hold.
OK … I just went through the 3 major indexes and made sure I had all of my charts in order – that includes extension targets and time extension targets. My read of the charts is that we are at levels that make believe that we are making support here in the markets. There is one question I have still about the ES/S&P 500 but with the other two main indexes more clear and obvious, I think I have to give some thought that the ES may also be at a major level of support.
I’m going to try and keep bias out and just analyze the charts and see how much evidence I have about being in possible support. I’ll start with the NASDQ 100 Index …
For the NQ, the first thing that jumps out at me is that we hit the minor-C (blue circle) wave time target which is 1.618x the time length of blue-A wave here today. The candle made today in that time slot was a large emotional one and it is a dark blue candle which my software does when trend strength has entered into the “extreme warning zone”.
How about price levels … We slightly exceeded for the bigger C-wave (red circle) the normal 1.272x target level that ABC patterns typically terminate at. That’s ok because it is an approximate target anyways, and when I look at the price extension target for the smaller c-wave (blue circle) we again finished right near the expected level as well.
The smaller c-wave (green) of the last move into support has formed 3 waves which I like to see as well.
Overall, I think with time and price hitting it so close here today, I am confident that the NASDQ has probably made a tradeable low today.
The above chart gives you a closer look at the last wave …
Russell 2000 Index Futures Contract (RUT) – 240 Minute Chart #1
The Russell 2000 to me looks like it is just completing the 2nd of a 3-wave structure. I say that because we are closer to the 1.618x target that 3-wave structures hit with their 2nd wave than we are to the 1.272x target that you see with ABC’s.
Also, this latest move lower is an “extended” wave structure, and by that I mean that it exceeded the 1.618x target and extended down to the more emotional 2.272x target level. That emotion makes me think that we are just finishing wave 2 of 3. While not exactly at the bigger 1.618x target level, the timing window was only off slightly, having predicted a low made in the overnight session last night – it makes sense that all of the markets bottom relatively close together during the regular cash sessions.
Russell 2000 Index Futures Contract (RUT) – 240 Minute Chart #2
So even though the NASDQ 100 looks to have completed an ABC, I still think it will fail in resistance and make the next leg lower in its corrective pattern … that move lower will coincide with the RUT’s move down into wave 3 support.
Ok, the S&P 500 Index is the one where I have less confidence that we bottomed in all the indexes today … let me explain.
If the ES completed an ABC corrective pattern to complete the first leg lower in this corrective pattern from October’s all time high, then price should have found support around the 1.272x extension target. Again, that is an approximation only so traders should not get hung up on an exact hit.
So I’m a little concerned that we overshot the 1.272x target, but if all of the other evidence tells me we completed into support then I am ok. The problem here is that it doesn’t all line up as well as it does for the NQ and the RUT.
Notice the time target … the 1.272x target is for Dec 23rd between 6pm and 10pm (that is the overnight session this coming Sunday). The RUT and the NQ hit their 1.618x time targets so well, I would have preferred that the ES did as well. The 1.618x time target window is not until Dec 27th during the 6pm-10pm window.
Also, the wave structure in this last leg down (blue circle) is hitting the 1.618x level which tells me that this leg is likely a 2nd wave of a 3-wave structure i.e., the move lower is not complete. Let’s look closer so I can better explain …
I have drawn a 3-wave completion down to the bigger 1.618x target which would make the ES a 3-wave structure like the RUT. The bounce from support would find resistance along with the other indexes and then fall lower to complete the 3rd wave.
So I think that it is very possible that the ES will need to complete its move into support early next week, which will be complicated by the Christmas holiday. Nonetheless, it fits better timing and price wise if I consider it a 3-wave structure that is yet to complete.
Bottom Line – The NQ and RUT are in support. The ES may be very close but not quite – I am hesitant to hold out on the ES because the other two are ready. If the RUT and NQ start to make moves out of support, I will assume that the ES/S&P 500 pattern “failed” to complete, which on its own is very bullish, and could lead to a big move higher very quickly.
If you read that earlier post, you will note that the three prior smaller corrective bounces in this move lower all came in at the 1.382x time window. That prior symmetry is why I think the 1.382x window will work again this time. That implies that the timing window for the bigger B wave corrective bounce is for early in the morning of December 10th. Note from this morning’s post that the timing window for the ES futures contract is tomorrow morning, so having the Q’s hang around until next Monday would imply lots of chop for the next several days.
The more important item to keep track of is the actual bounce and where resistance is found … here is the current chart for the Q’s.
You can see that the prior corrective bounces in terms of resistance, failed right in the low 50%’s … so I am looking for both symmetry in the time window (1.382x) and price (around low 50%’s). I have noted a possible sooner timing window on the chart above because of how the S&P 500 chart looks to be finding a sooner timing top (tomorrow morning). Timing windows are usually pretty close for the S&P and NASDQ 100 so I have to keep aware of that fact.
If I look at the bigger broadening price pattern, I see a possiblity of price going all the way down to the lower support line. That seems like a long way to go, but I am keeping an open mind, if in fact we do head lower to a bigger C-wave support target.
Let there be light …. the Donald seems to have delivered once again with China, and the market is gapping higher coming out of this weekend’s dinner date with the Chinese President. Time to take a look at the markets to see where we are versus our road map …
S&P 500 Index – 195 Minute Chart #2 (November 21st)
You can see from the above chart that I am expecting the market to find resistance right above the a-pivot high (2815.15) Since the market has not opened and therefore, the S&P Index does not yet show us the indicated move, I will use the ES mini futures contract as a substitute for the S&P 500 cash index.
The a-wave pivot high is 2818.00 on the ES futures contract … the high so far overnight is 2814.00. I am showing my timing windows on the above chart as well.
You can see that the minor-a wave high (purple) for bigger B (red) came right in at the 1.382x timing window … the minor-b wave low (purple) for bigger B (red) came in right at the 2.0x timing window. It appears that we are pushing right into my expected resistance level for the end of bigger wave-B (red) here at the 2.382x extension window which is scheduled for tomorrow in the overnight trading session (2am – 6am).
So the proof in the pudding will be shown the next couple of days … let’s look at the wave structure of the last move here into what I think will be resistance.
You can see from the above chart that the minor-c-wave into the B-wave high is making what looks like a normal 3-wave pattern. It looks like we are near the end of the minor 3rd wave which will also mean that the B-wave is complete.
If we do find resistance and start to move lower, I think that would be proof that we are going down to complete the bigger ABC structure. My minimum C-wave target is the 1.272x extension target which is around 2510 on the ES futures contract.
Bottom Line – most traders will be thinking that this move of the last week or so is the start of the Xmas rally and that we are headed higher to make new all-time highs. I obviously don’t believe that we are ready to do that, and we are, in fact, about to start the biggest, most viscous part of a corrective wave (the c-leg). I want to watch closely here over the next day or so to get confirmation that the B-wave is indeed complete and we are beginning the next leg lower.
Unlike the S&P 500, the NADQ 100 Index made a bigger first wave lower. I can count 3 minor waves lower into yesterday’s low, and therefore I think we have begun the B-wave bounce in the current corrective price structure.
The first leg lower (small wave-a), the small wave-b corrective bounce ended right at the 1.382x timing window. and the small wave-c ended right near the 2.382x timing window. Let’s draw the next wave to see where those windows ended up …
Using the next bigger wave lower down (small wave-a) to draw our timing targets, the small wave-b corrective bounce ended right near that same 1.382x timing window we saw in the prior wave analysis. and the small wave-c ended right at the 1.786x timing window.
Using these previous windows, let’s draw the big corrective wave pattern to see where our timing windows could end up …
So, wave symmetry makes me think that the bigger wave-B timing window should be right around that 1.382x extension target … that puts the B-Wave high in right around the December 10th in the 6am – 10am time slot.
Wave-C’s time window is not quite as sure thing as the B-wave based on the prior c-waves coming in at 1.786x and 2.382x. If we look at these time slots as a bigger window, we look for a bottom for Wave-C between Dec 30th and Jan 29th. That is a big window, and since we know that Wave C’s typically complete in 3-wave patterns, we should be able to get a good sense of the completion window when we start getting closer to what looks like a completed 3-wave structure. Bottom line is that we are likely to end this corrective pattern in early 2019.
The bigger ABC corrective pattern in the S&P 500 and the NASDQ 100 Indexes are playing out pretty much as I discussed in my earlier blog posts. I think we found minor support in the NASDQ 100 futures this afternoon and we should bounce higher for the next day and a bit …
NASDQ 100 Index Futures Contract – 60 Minute Chart
How does the timing look going forward?
NASDQ 100 Index Futures Contract – 120 Minute Chart
The next minor resistance should be found at about 7050 – 7060 in the 8am-10am time window on Wednesday. The next push down should then go to about 6715 at around the 2am-4am next Monday morning.
Then the bounce from there should push to about 6980 in the 12am – 2am window on Nov 23rd … that is on a Friday so the high could be at the end of the day Friday or in the evening hours when futures reopen on the 25th.
The final support low should be around 6270 and be made around the 2am-4am window on Nov 30th … looks like a good old-fashioned puke fest into month end.