I Am Inclined to Count $ES Bullishly Here

It was prudent to be bearish during the sideways chop we had been in because it culminated in the selloff we just had. That said, it’s important to adapt and reassess.

The very bearish counts need us to move much lower and much faster. In other words, if this were a one down two up, we should be in a third wave down and I feel like we would all know it. Looking at it as it stands, there is a way to count the advance as an impulse wave (the orange 4 of the blue 1 is a bit big compared to the 2, but not too terribly so), and looking at the proportions of the selloff, it has the “look” of a 3-wave move. And: it came right to the 50-61.8% retracement of the prior advance, so all of this—barring another selloff—is an excellent setup for a 1-2 pump.

Couple this with some of the bullish signals I saw at the low today, the fact that the Nasdaq 100 can be counted as a correction, and there’s a good chance we may move up sharply from here.

Things I would like to see in the coming days: a vast improvement in breadth, at least one high volume green daily bar, and Bitcoin finding its legs.

ES

One quick look at two bond-related risk signals I look at.

$JNK, which warned us in the November highs that something was afoot, now looks pretty bullish here at these lows:

JNK

$TLT, which I had favored to experience a relief rally (here), has done just that and may resume its expected downtrend. It’s not clear to me just yet how to count the relief rally, but it certainly went a far way toward the orange target box, and perhaps that is good enough. The move from orange 1 to orange 2 certainly looks corrective in nature.

TLT


[UPDATE]: Here is a more refined count of the S&P. In hindsight, what looks to me like a 3-wave decline can be better understood with a triangle b-wave in the center, like this (very hard to see while you’re in one):

ES


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5 thoughts on “I Am Inclined to Count $ES Bullishly Here”

  1. What do you make of the VIX holding above the Great Sven Wedge since its big breakout the day after Thanksgiving? It did so in September and failed back into the wedge, but this one seems to have a bit more legs to it. Possibly just jitters over a newly re-nominated fed president who doesnt have the same constraints that he did while angling for his re-appointment?

    Or do you think the entire concept is invalidated?

  2. I’m a bit torn on this. At this point, the Great Sven Wedge™ has gone on for so long in time that its upper trend line is now so low “in price,” and that upper trend line has been violated so many times that I’m not even sure if the structure is still relevant any more.

  3. Thats a good point that the “price” inside the wedge is now pretty low. I have it at roughtly 16.5 to ~12. The ViX at that level is no fun at all. If the lumberjack was right it seems like now or never for the it to take off, and to do so in a hurry. Always appreciate the analysis.

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