Eyeing 2700 Ahead Of Another Big Leg Down

Last weekend I wrote:  My best guess on price path is for a continued move higher into the 2700/2750 area but probably only after a retest of 2450/2400 area.  

What actually happened:  The whole week turned out to be a retest of the 2450/2400. Now we need to see if we have enough energy to get up to the higher range next.

What next?

Not a lot of change on the indicators front from last week. The two very short term ones stay on buys. Longer term ones stay on sells. The market ended up almost flat on the week as well. Looking at last week’s action, we seem to be backtesting support in the 2400 area setting up another leg up into the 2700 range, though I am beginning to question if we can muster up enough strength to get there. There seems to be more shorts/bearish conviction in the market/system now, so I think it makes sense for a move higher into 2700 area to clean them out first before starting back down.

So shorter term, I am looking for upside corrective action to continue. Bigger picture after this short term upside reset is done, my expectation is for another leg to the downside into the 2000 area and possibly more. But as usual, for trading, we will follow our indicators and rules to position the best we can in this volatile market. 

ES Grey Zone areas:  The grey zones on the ES 5 min chart below are what I draw in on a discretionary basis -- they are support and resistance areas which the market is most likely to react from. If we test a zone from below, it is likely to be rejected and fall lower to test support zones below. If we test a zone from above, it is likely to take support there and begin a move higher. So these zones can be used for intraday trading and/or as entry points for positioning for swing trades. These zones are drawn in based on what the market has done there previously both on smaller and larger timeframes.

Grey zone resistance at at 2507-30 and 2613-36. Support is at 2441-19 and then at 2384-65 area.  

Daily pivot is at 2486.5. Resistance R1 is at 2523.5 and R2 at 2567. Support S1 is at 2443 and S2 at 2406. 

All the best to your trading week ahead.

Princely Mathew hosts The Smart Money premium service at ElliottWaveTrader.