Presuming I Am Right (Still in Bull Market), A Couple of Near-Term Outcomes

A member has asked an important question: Doesn’t the move out of yesterday’s low look corrective?

What he is of course referring to is this on $ES:

ES

Now, prima facie, yes, it looks like a 3-wave move. However, let’s assume for the sake of argument that my bullish long-term hypothesis is right and that we are firmly within a bull market, and have much higher prices to come. If that’s the case, then this is a correction, and it should bottom at some point. Now, there are essentially two ways we can bottom:

  1. A “V-Bottom,” in which the daily chart here will look like late 2018 or something to that effect, or
  2. A “Wyckoff Bottom,” in which we stay stubbornly low while institutions take their time accumulating

Now, I have no idea which of these will occur because I have no idea what institutional motives are here. So, to the original question: if that initial move is merely corrective, then it’s more likely we’re doing the Wyckoff bottom, maybe we form a huge wedge, like this:

ES

If it’s the “V-bottom,” it should look like this, coming right out of this low like the Devil’s on our heels:

ES

The reason I favor the “V-Bottom” is essentially two-fold:

  1. The sheer record volumes we’ve just seen—to my mind—seem more compatible with a “V-Bottom.”
  2. It’s cruel of me to incorporate this into my analyses, but, I do follow dozens of Elliotticians, and by far the majority are counting this as a 4th wave (of a 3rd) and are expecting a couple of additional lows before the bottom is in. And, it’s terrible of me, but when I see that sort of consensus, I try to favor something more people will not expect. And right now, that seems to me to be the “V-Bottom.”

Now, there’s no guarantee that I will be right about that decision. But, if we fail to rally hard out of these lows, we may expect a couple of additional nominal new lows, but I won’t be expecting terrifying new lows.

And so: if it is a “V-Bottom,” then we’ve got to count the initial rally as an impulse, and, though it’s ugly, it can be done thusly with a micro 4th (orange) wave in there, like this:

ES

So, in the end, I have found that the most obvious structures in Elliott Wave counting are often illusions (not always), and such a clear prima facie 3-wave move is going to look like that to everyone, and that gets a lot of people on the wrong side of a trade. So, all I’m trying to do here is pick a count that may be confirmed by some of what we’re seeing elsewhere like perhaps total retail capitulation with a record volume spike that may be more consistent with a “V-Bottom.”


[UPDATE]: I want to add one more reason I favor sort of forcing an impulsive count here: it’s also because I know roughly where we’ll be headed if this inverse plays out and it would be more compatible with a full impulse wave, the breakout being the 3rd wave of a move.


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