I have been patiently (ha) waiting for a third wave pump to come along on $ES, and this rally is an excellent candidate for just that. Crucially, we have broken the down trend with conviction. Now, hmm, what to do. There are a couple of problems: if that is a green 2 down there, then we’re in a green 3, and surprises are to the upside in threes. Also, with all this coiling we’ve had, I may even not have enough ones and twos to compensate for it all. For instance, I have my subminuette (red) two down there as a flat, but for all we know, that flat is itself another nested 1-2.
I labelled it the way I have in an effort to be a little conservative. The best I can do for the moment is to pick the best looking 1-2 in there and post the expected extension target for that, and then place all the other numbers around it. The best looking nest in there is the micro (purple) one. So, I’ve posted a box here where we would expect that wave 3 to stop (and ideally at the top of that box).
At any rate, what we would like to see from here is further extension, followed by small corrections and smaller rallies as we go, a long series of fours and fives until the nests all complete. This process could take a couple of weeks: that “yawning arc” I’ve mentioned before.
Just keep in mind: I’ve placed these in a reasonable trajectory, but coming out of a low like this, there’s not a lot stopping the market from becoming unreasonable. You guys will notice that I often have to scoot my projections to the right, as the market can proceed more slowly than I expect, but on occasion, I sometimes have to scoot target boxes and wave labels to the left.
[UPDATE]: Since we have entered deeply into the target range expected above, I will file this under “Successful Calls.”