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Hello everyone! It was another dull week in the markets with $ES heading particularly sideways. The broader context remains essentially unaffected by this action, but deciphering the lower timeframes has proven to be a tall task. In this weekend’s update, I will evaluate both the bull and bear cases as I look forward to the resolution of this range.
Macro Context:
- The macro count is unchanged. Price is still in a macro correction from ATH’s. I still believe we will see one more push into overhead supply before the next major leg down.
The Bull Case:
- The mid term bull case calls for a direct move higher to escape this range and head towards overhead supply at 4350/14k. $NQ is already peeking above the range high but follow through is required. In this scenario, the ((x)) waves would be complete with $ES as an expanded triangle and $NQ a WXY with truncation.
- On Friday afternoon bulls rallied into the close, coming from some key areas. For $ES, this rally came from the important fib zone discussed in my last update. This move keeps the bullish hopes alive, but continuation is imperative.
- Structure wise, $ES would be valid as a WXY from the May 5th high into the 0.5-0.618 fib zone. I have slightly adjusted my degree labeling of $NQ to reflect the running flat, also from the May 5th high. The entire past week could simply have been an X wave pullback – to confirm this, bulls will need to find acceleration higher early next week.
- If $ES falls below the key fib zone and $NQ below 13,260 – the bull case will be in jeopardy.
The Bear Case:
- The bear case calls for one more sweep lower before making the last run higher into the 4350/14k targets. In this scenario, the (E) wave of the expanding triangle on $ES would evolve into a more complex wave. $NQ has the potential to turn into a running flat for the ((x)) wave. If this scenario does play out, I will be watching the 4H demand below on $ES for a reversal.
- If Friday’s highs hold, these bearish structures would take over – likely driving $ES to 4050 and $NQ towards 13k.
Lower Timeframe Situation:
- I could make a compelling argument for both the bulls and the bears – but what’s more important than speculation is what is actually happening right now. The end of day (EOD) rally took both indices into 1H supply. I cannot be bullish until this supply is taken out. If supply holds, there is essentially no demand below to save the bulls.
- Heading into the week, these zones will start as ‘bull above/bear below’ zones for me. Trend has shifted to the downside, meaning bulls will have to prove themselves this week if they are to take back control.
From Consolidation Comes Expansion:
- While it may feel like this range will continue forever, all consolidation eventually leads to expansion. Perhaps an interesting observation… Price has been stuck revolving around the midpoint of this range. If the range breaks out to the upside, the “traditional” equal move would put price at 4352 – right into major supply.
Individual Stocks:
- Google soared higher this week into 3D supply. From here I will be on watch for a reversal to develop. I will not be short until a significant and proper reversal structure forms. If $GOOG climbs above 125, I will move on to other setups.
- A potentially more immediate setup is $AMD. Following a reversal structure from 4H demand, 1H demand has printed at 90.43 in line with the wave count targeting 102. If price retraces to 1H demand, I will look for longs towards the March high.
Note: As markets draw near to what I expect to be the end of this corrective move from the 2022 lows, I will start to once again become more interested in swing setups. There will likely be more individual stock charts in my updates during summer and the rest of the year.