Market Update …

So all experienced traders know that Mother Market never makes it easy … the current market is I’m sure no different.  So if that is the case again here, then traders should keep an open mind when looking at the likely path going forward.  Here are some of the possible paths for the market going forward …

S&P 500 Index Futures Contract (ES_F) – 240 Minute Chart #1 

I believe that the above scenario is what most market participants are hoping for, and that is why I think that it is the least likely to be the road ahead.  Most traders are bulls and are therefore hoping that the late October low is the low, and that we are making an inverted heads & shoulders reversal pattern after finishing with the entire corrective price action off of the recent all-time highs.  Does this scenario make sense … I think that the price action down into the October low looked too strong to be completed with one simple ABC price structure.  Of course I could be wrong, especially when you consider the seasonality coming into play here the next two months.  Bottom line, is that we have to be aware of this possiblity, but I am leaning in another direction for the market.

S&P 500 Index Futures Contract (ES_F) – 240 Minute Chart #2

Some traders are holding out for a final flush that retests the actual October low … is that what we are going to see?  If too many traders are waiting for that, then it would make perfect sense to see Mother Market, fake traders out and NOT give us a final high-volume flush.  It’s obviously possible, but with the seasonality we are coming up against, I could see the market not completing the larger, more obvious ABC price structure.

S&P 500 Index Futures Contract (ES_F) – 240 Minute Chart #3

This is the scenario I think makes most sense when I look at all the evidence right now … I think the market’s internals are not such that we are going to push down to make a new low and complete the bigger ABC pattern (i.e., scenario #2) right now.  I think it makes more sense to see a seasonal rally now for the next couple of weeks … that will get the market set better for a final reversal down into a bigger C-wave move into support.  Imagine how many traders jump on the “end of the year/Christmas rally”, hoping to catch-up to the overall index’s YTD 2018 return.

I won’t bother showing all of the market internals that have me thinking this way currently, as the market has to prove out what it intends to do the next several days.  More important to traders is just the reminder to keep an open mind and be willing to accept whichever path the market eventually decides to take.

Here is a possible level for market to find resistance in a Scenario #3 pathway …

S&P 500 Index Futures Contract (ES_F) – 240 Minute Chart #4

S&P 500 Index Futures Contract (ES_F) – 60 Minute Chart

The move down into last week’s low looks to me to be a complete 3-wave structure.  The flush down into today’s low was probably enough to leave lots of traders behind if we are indeed going to bounce higher into resistance from these levels.  Speaking of today’s flush, let’s take a c;oser look at it.

S&P 500 Index Futures Contract (ES_F) – 15 Minute Chart

I can see a possible complete 3-wave structure here, but I can also see how we might need one more minor low below today’s low to finalize the fake-out.

Bottom-Line … be prepared for anything.  To me it looks like we could bounce here into a bigger B-wave high, before correcting one final move lower into a bigger C-wave support zone.  Lots of pain if that is indeed what happens.

Cheers … Leaf_West

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