IFF then Analogue

IFF we are in a bear market, I found a wave sequence this morning that might be its analogue. Granted this is on a much shorter time scale, ES 5-min, it shows that the wave sequence is possible! When I saw the sequence this morning my jaw dropped a bit.

ES Futures - 5 min - Mini Bear Market

Starting out down to wave ((1)), the wave sequence looks like absolutely nothing. You & I might otherwise be thinking just another corrective sequence. Then, there is the sharp rebound to just avoid  going over the high. Then, another still innocuous corrective sequence lower as wave ((3)). Then, a huge pop back up to almost take out the high of ((2)) as wave ((4)). Why wasn't the high exceeded?? Reasonable people want to know. Then there is a drop, then a clear b wave triangle, and then a much, much larger drop. And, it's a much larger drop than the triangle suggests by the usual triangle targets. All throughout waves ((1)) to ((4)) there is huge uncertainty. And then, it lets go. Notice I caught this at the time. With the waves you see.

To demonstrate to you that this really is indeed a diagonal, I am going to add the follow-on sequences in the chart below.

ES Futures - 5 min - Follow-Up Waves

Notice, the diagonal ends where I initially suggested, and then a massive, corrective flat follows, labeled as ((A))-((B))-((C)) to b. And this is followed by a c wave lower, proving out that the diagonal was a leading diagonal.

My point is two-fold: 1) there is some force in the market currently restraining downward impulses from initially forming. I'm not quite sure what it is, but I have a feeling it has a lot to do with people 'trying to get their money back' from losses. Or perhaps it is related to automatic investment schemes that just deploy money regardless of what the market is doing. Again, I'm not sure. So, there remains a huge bid under the market which causes diagonals. And, 2) with the daily three-waves down in the Dow shown yesterday, do you know where those would go? They would be that little number ((1)) up there. That's right, the majority won't believe a bear market until the breakdown of ((3)).

Will this happen? I absolutely do not know. Can it happen? Seems like it is possible. But again, diagonals are low probability patterns that must prove themselves in every detail. IFF we are in a bear market, we may only be in the very beginning stages. Can we go over the high again? Absolutely. Right now I assess pretty even odds 47-53 bull market-bear market. There is very little edge except counting the waves and trying to stay with the local trends.

Have an excellent start to the evening.

TraderJoe