That was a very impressive decline on SPX that continued after hours
yesterday, and the wave down bottomed at 1074 ES, making it a peak to
trough move of slightly over 50 points on ES in slightly over 24 hours.
Very impressive indeed.
I don't do EW much myself but I have read a couple of books and am
familiar with most of the rules. I've put a possible wave count on ES
since the high last week:
I'm using the bull count taking this as an ABC move from the top. For
the bear count you just change ABC to 123 and assume an extra two waves
to follow of course. On this count we saw 3 of C yesterday and we have
started 4 of C. As you can see from the chart I'm considering the
possibility that wave 5 down has already started, though we could
technically have a rally under this count that went as high as 1106, but
would go no higher than the low on Tuesday.
In the very short term on the 1min chart ES formed a broadening
ascending wedge from the low last night but as I write has broken down
from it, which suggests to me that we may well see more downside this
The main USD currency pairs are suggesting that too, as they rallied for
a while overnight with ES, but then diverged to make new lows after the
overnight peak on ES. EURUSD is now most of the way towards my target
for a longer term bullish scenario on EUR. A break below it would look
very bearish to me and would suggest that we may see a new low on it
GBPUSD has also made it most of the way to my target.
Again, a break below would look very bearish and suggest that we may see
Oil has made it most of the way towards the lower trendline of the rising channel:
I have noted the exact target levels on all of these if these were to be hit today.
Copper hasn't been falling as fast ast the others, and is only halfway
to my target. Like ES, at the time of writing it is somewhat above the
The ones I'll be watching most carefully this morning apart from ES are
EURUSD and GBPUSD. If the bounce at my target levels that would only to
be expected, as they are the natural levels to see a reversal of course.
If they break down through them though, then it would suggest strongly
on both that we have been watching a rally on both of these since they
bottomed in early June, and that they are both still in a major bear
move. If so, that would suggest strongly that we haven't seen the low
this year for equities either so it is very significant if those levels
fail to hold.
I'll also be watching those levels because at the low in February the ES low was made at almost exactly the same time as my EURUSD trendline target was met. That didn't happen in July of course, where EURUSD bottomed almost a month before ES did, but it is something to watch regardless.
If that is the case, and this is an ABC correction as I have marked
it up in my EW count, then we may be very close to the low on ES, with
just one lower low yet to come and if so, then the relative strength of
copper overnight also has a bullish look to it.