Bull Still on Offense

After testing key support this morning at the pre-market low, the market proceeded to bounce higher following the open, filling out expectations posted for wave 1 of (C) within wave 5 of the ending diagonal count off the September bottom. Therefore, our setup for continued upside toward a new all-time high as wave (C) of 5 remains intact as long as the pre-market low at 2917.50 on the Emini S&P 500 (ES) holds.

Price has since pulled back following the high seen earlier this afternoon, which fits well as wave 2 of (C) assuming support holds. Ideal support to hold would be the .618 retrace of wave 1 at 2924.50 ES, but the setup remains technically valid as long as price is above the pre-market low. If this near-term bullish setup does hold, then we can expect wave 3 of (C) to target around ~2950 next before consolidating again in wave 4 of (C).

Otherwise, below the pre-market low at 2917.50 is the initial warning sign of a breakdown in progress, with the last chance for bulls to put up any sort of fight back at last week's low. If price fails to hold last week's low, all bets are likely off, and I would personally expect a full retracement of the September rally to follow.

ES Z18 - Micro - Oct-02 1219 PM (1 hour)
ES Z18 - Micro - Oct-02 1219 PM (1 hour)
Garrett Patten is a senior analyst at ElliottWaveTrader covering both U.S. and international equity indices as well as stocks.