1701ES Is Key To Follow Through Uptrend

After we caught the short this morning at our 1696ES target from yesterday, we saw the market shed approximately 13 points from its high.  As we were going down, I noted that we only have three waves coming down into the lows, and aggressive traders may even consider a long and follow it up for a trade.   Well, that trade took us back up 13 points, so it was wild day today.

But, the issue is that with the size of this move higher, we have taken ourselves beyond the standard wave action which is seen in a 3rd wave.  The great majority of the time, the market moves up to either the .382 or .618 extension of waves (1) and (2) for wave i of (3) and then pulls back in wave ii of (3). 

However, the market today went straight for the .764 extension, consolidated in what may be a 4th wave, followed by a 5th wave directly to the 1701ES level.  The problem with this is that it looks more like an a=c move in a corrective rally, despite its seeming strength.  So, when the market goes beyond the standards we like to see within a 3rd wave move, we have to take notice, as it, more often than not, is a warning that something else may be playing out.

Therefore, as we said last night that the 1696ES level can provide us with a strong turn down, at this time, unless the market provides us a better wave ii pullback, if we head directly to 1701ES, that, too, can provide a strong drop towards the 1660’s, in a similar, but larger set up, as we were looking for last night.

But, if the market is able to move through the 1701ES region, then my initial target would be 1717ES.

For now, I do not have a preferred count, as it will all depend on whether the market heads directly to 1701ES or provides us with a deeper pullback first.  That will provide the trigger for which count is primary.

So, at this time, if we head to 1701ES first, and do not move through it, then that could represent either the green b-wave or the yellow wave ii, which would send us down hard tomorrow towards the 1660’s again.  However, if we are able to either pullback in a bigger wave ii within wave (3) up, or bust through the 1701ES region, then I will look towards he 1717ES region next.

 Elliott Wave Chart