$ES Bear Count & Targets

If my interpretation that we’re ending the correction on $ES were correct, I would expect to see gathering strength here. Instead, we’ve seen:

  1. Falling back out of the channel discussed here is not a positive development.
  2. The fact that we are capable of counting the move down off the highs impulsively as a series of ones and twos is also not a positive development.

It renders, in my opinion, the possibility that we are in a “greater 4” (instead of the “lesser 4” I was expecting) less probable, too, because fours shouldn’t pick up steam as they go. This makes me wonder if we’re even in any four at all.

So, looking at the possibilities available to us here, I am leaning towards “The Greater 1-2 Pump Count” here. We would expect to see a zig-zag here, two 5-wave impulses, correcting everything from the October of last year low.

If that is the correction we are in, we may move toward the orange boxes just beneath us in a series of threes, fours and fives, finishing the first 5-wave impulse I have labelled here as minor (green) A. After that, we would expect a rally to B, followed by a second 5-wave impulse to the downside, reaching perhaps as low as the range depicted by the large orange box beneath us where I have green C and orange 2 positioned.

See the next chart for some invalidation levels.

ES

It is not easy for me to become too bearish, given what i am on seeing on many other individual names, so I can’t endorse the bear count too eagerly until we see even greater weakness. Until that weakness does arrive, we remain in a falling wedge that is diverging here. If we get a strong rally from that, taking out some prior highs, we begin to render the bear count less credible. That said, collapsing from this structure would be grave.

SPY

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