So no one said trading was going to be easy … I try as best I can to follow my chart indicators to confirm/raise suspicions about my price structure reads, and adapt on the fly as necessary. I thought it would make sense to review my read to-date, and try and see what the charts are suggesting from here.
Ok, the first snapshot should look back at what my last major read was.
NASDQ 100 Futures Contract (NQ) – 240 Minute Chart #1
So I have gone over in prior blogs why my read was what it was … suffice to say, when price extends to the 1.272x extension level, that is almost always the end of an ABC structure, and when it extends down to the 1.618x extension target, the price structure is almost always wave 2 of a 3-wave structure.
You can see that because of where the Dec low pushed to (i.e., the 1.618x target) I thought we were in the process of completing only the 2nd wave of a bigger 3-wave corrective structure. We will look at the bigger structure in a bit, but that is why I thought what I did.
On a smaller wave scale, it appeared at the time, that the Dec lows had not completed the smaller 3-wave structure that was making up the bigger 2nd wave. As mentioned, counting smaller waves is inherently more tricky and often less obvious … I make many errors when trying to determine smaller time frame waves because of the natural minor movements of price during these smaller time frames.
Long story short, I thought we would bounce off of the Dec lows and then push back down to make a new minor low just below the Dec lows. My software was painting dark blue extreme trend strength warning candles with pink divergence dots, and often price makes one last little push to new minor lows when these dark blue candles appear – not always, but quite often they do that one last push to extinguish the selling pressure.
NASDQ 100 Futures Contract (NQ) – 240 Minute Chart #2
So the bounce off of the Dec lows has been a V-bounce which are pretty rare … less rare during the whole QE-fed program of the past 10-years, but they are pretty rare nonetheless.
You can probably see the look of a 3-wave structure in the bounce off of those Dec lows and how price has pushed throught the SLOT resistance area I was monitoring. Price has just pushed into the resistance line drawn off of the tops of the corrective price action so far since the Oct high.
Because of the strength of this bounce off of the Dec lows, I think it makes sense to look at the entire corrective move as a possible ABC, and therefore, the lows may be in for the next several months. I don’t like to assume that something rare has occurred, but the emotion entailed in the December selling may have been something that caused a rare extension in a wave structure.
Before we go further, let’s look a little closer at that move into the Dec lows and the bounce seen since then …
NASDQ 100 Futures Contract (NQ) – 240 Minute Chart #3
So again, trying to count the smaller waves inside bigger structures is often tricky … I can see 3 smaller waves down into the Dec low, but you could also argue, like I have done previously that there were only 2 smaller waves.
Because of the strength since the Dec lows and the fact that we busted through the SLOT resistance zone I was watching, I think you have to argue that there were indeed 3 smaller waves and that price structure down into the Dec lows was complete … the only question is whether or not the Dec lows was the end of a C-wave and therefore a possible end of an ABC corrective pattern off of the Oct highs. If it was, then there is a chance that we are going to retry/retest the Oct all-time highs.
Or was the bounce out of the Dec lows “extra” strong because of the emotion involved in the late-month flush, and therefore,
Or we could be making an even more complex corrective wave off of those all important all-time highs made in October – remember, if those October highs were indeed the end of the bigger weekly 3-wave pattern off of the 2009 lows, then traders should not be surprised by a complex corrective structure off of those highs. I just don’t think that a simple ABC down to the Dec lows is complex enough to get the whole correction complete and we are therefore about to head higher on a new bull run to new highs.
Here is a possible look at what might be ahead of us …
NASDQ 100 Futures Contract (NQ) – 240 Minute Chart #4
So as shown above, anything really is possible ahead of us … all we can do is monitor the waves as they unfold, and then anticipate where we are heading to next.
All I can say right now is that I think we should be at a logical area of support, it appears we have a complete smaller 3-wave structure into this upper trend line, and we did that right into a monthly OpEx. I have noted several times on tweets and blog posts that price will often pivot right around OpEx expiry dates – if that happens here again in January 2019, then it would make perfect sense because of the look of a complete wave structure, extension targets getting hit, and finally, pushing right into that upper resistance line drawn off of the corrective pattern’s highs.
If we have made a top, then it make sense for price to at a minimum, head down to SLOT support … the 61.8% level is at 6205.50 currently. Price could bounce off of this level and then make the next bigger push higher, or it could fail at bouncing and we head lower to complete the bigger 3-wave price structure that I was originally calling for.
Bottom Line … I’m looking for a pull-back to begin anytime here, and we will see what happens as we move into SLOT support.
Cheers … Leaf_West