Up, up, and away

ES saw a really nice move into close, tagging the 1726.50 target and then some. The question now is, will this market pause here for a corrective consolidation in wave ii, or am I off by one degree and wave iii of 3 is already underway.

When I take a look at the cash indices, it is easy to make an argument that wave iii of 3 has just started, after a very shallow wave ii retrace. However, when looking at the futures charts, it is a lot harder to come to that conclusion.

Therefore, we should be prepared for both, but my primary is still that we should see a small wave ii of 3 retrace starting tonight or tomorrow, targeting between 1719 - 1709. If price decides to continue marching higher from here though, and heads straight to 1750 ES, then it will be a clear sign that wave iii of 3 is already underway, and this divergence on the hourly MACD should be taken out.

Shorting at this time is clearly not recommended. You do not have to catch exact tops. That said, keep Avi's larger picture in mind as we are entering a potentially dangerous region.

Garrett Patten is a senior analyst at ElliottWaveTrader covering both U.S. and international equity indices as well as stocks.