Hammer Plus

Yesterday's weak (red body) hammer was confirmed today with a higher closing high. We said, daily prices could get back to the 18-day SMA - the 'line in the sand' - and they did. The daily chart is below.

ES Futures - Daily - Hammer Confirmation

It looks fairly clear there is a battle going on for the 'line-in-the-sand'. The potential triangle that might come before the last wave set up is sketched in. It would be great if the pattern formed with the more usual and typical 78% retraces.

The daily slow stochastic has turned upward, but is not in over-bought territory yet.  We are waiting to see if price will close above the 18-day SMA which would turn the bias positive again.

Is the triangle the only pattern under consideration? It is not. When triangles fail , they often fail as a series of nested 1-2-i, ii lower. Here is the current chart showing what the pattern would look like if the triangle fails instead.

ES Futures - 4 Hr - Alternate

 

In this alternate, wave (ii) would now be 'longer in time' than wave (i). And, we recall from counting down the wave from May high that it can be interpreted as a five-wave sequence in the futures. For the present, though, it looks like the up wave wants to finish a five-wave sequence upward, so we will allow time for that, and keep the alternate in the chart drawer for now. The point is since we can see both very realistic possibilities, neither will surprise us. We just watch and count as best we can.

Have an excellent start to the evening.

TraderJoe