Inside Week Shakefest Potential

Last week’s action was an immediate upside continuation that fulfilled the 2775-2815 target zone on the Emini S&P 500 (ES) from the massive rally off of the 2603 low. The bulls hit a temporary wall against our 2815-2825 key zone during the past couple days and have been attempting to backtest the 2745-55 support. In the meantime, the market has temporarily found a footing on Friday around the 2768 trending support area where a bunch of daily support levels align as well.

The main takeaway from last week was that the 2603 significant temporary bottom setup proved its worth as the bulls managed to rally another +50 points versus the prior weekly closing and got very close to +100 points during the week’s high. The massive inside month range for November is now playing out very well as the bottom has been established and the top from the October range breakdown expansion context.

What’s next?

Friday closed at 2778.75 and it was a decent follow through to the downside after hitting against the 2815-2825 wall from the prior couple days. Heading into this new week, we now see a fairly high probability that it’s going to be an inside week within an inside month context. This means that traders ought to be careful and be mentally prepared from getting shaken left and right with the classic shake-fest. For reference, the weekly range is 2818-2712.75, so just over 100 points worth of range for traders to scalp on quick setups.

Short-term wise, when price action is below Friday’s high of 2811, it favors the 2745-55 support backtest target being valid from last week as the pattern does not look finished yet. If above 2811, it opens up the potential of breaking above the inside week range with the 2818 high being the obvious goal along with the 2815-2825 temporary wall we discussed. This means that the current Sunday night bounce is treated as a dead-cat bounce versus Friday’s flush.

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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.