Charts on Emini S&P 500 (ES): Market in High-Level Consolidation

E-mini S&P 500 Futures Weekend: Keep It Simple Stupid –Inside Month Context Part 2

The first week of October morphed into an inside week within an inside month context by rejecting against the prior ATH at 2947 with the week’s lower high at 2944.75. If you recall, heading into the week, the bull train was looking for an acceleration to continue its upside pattern towards 2960-2970 which means the bulls ultimately failed their immediate breakout thesis with the lack of a 2947 breakout. This opened up the opportunity for the opposing bears to launch the counter attack for the grind towards the downside range with the micro breakdown of the 2907.5 level (derived from the prior week’s low) and then managed to overshoot vs. 2883.50 bigger inside week range low with the 2873.25 on Friday.

The main takeaway from this week is that the market is now in a high level consolidation mode hovering against major support on the higher timeframes basis back towards flatlining/range high. This means that the prior month’s low at 2865 is now the must hold support in terms of this backtest to the downside range to complete the rectangle range. Otherwise, if price action fails to hold here then it likely morphs from high level consolidation/inside month into a breakdown month towards 2820/2803 next major support levels. Please note: the large range expansion in terms of points if so. (unless of course if just pierces 2865 to kill some stops and does a V-shape reversal right back up in a swift matter)

What’s next?

Friday closed at 2895 and it was a temporary higher lows sticksave at 2873.25 (prior month’s low 2865) which overshot one of the key weekly levels of 2883.50. Heading the second week of October, the overall monthly range from September is 2947-2865 and we’re maintaining our thesis of the inside month context per our trading plans. Currently, we’re treating the 2873.25 low as the temporary bottom and we’ve updated the 4hr white line projection chart on how the route should partake back towards 2907.5 prior breakdown level and then the continuation towards the 2940s range high.

As noted earlier, if price action does not co-operate and mimic our thesis/projection and breaks below the 2865 must hold support. Then, the inside month context would be invalidated and the action morphs into a legitimate breakdown where there are no major supports until 2820/2803 for a larger range expansion backtest.

Clear and concise version:

Utilizing the buy the dip strategy vs. prior month’s low 2865 back towards the range high when looking at the defined risk vs. reward here with the inside month context. If price action starts breaking below, then be careful as there’s nothing major until 2820/2803 for a monthly range expansion breakdown. 

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Ricky Wen is an analyst at ElliottWaveTrader.net, where he writes a nightly market column and hosts the ES Trade Alerts premium subscription service.