The Stimulus II Count

Back on December 28th we wrote, that a triple zigzag for the minute ((b)) wave up was possible ...

"From a wave-counting perspective, building on yesterday's post, we said that the minute ((b)) wave of a Minor B wave as an expanded flat, reached the needed 105% level of the prior high in order to qualify for an expanded flat. It appears to have done so as a complex w-x-y wave. So, it has met a 'typical' expectation. But, we can see no reason why - if the market chooses - that the minute ((b)) wave couldn't become longer in time and price as a triple zigzag, perhaps if the larger stimulus is passed. But, let's be clear, it does not have to."

Here is a view of this wave, which is proceeding upwards in a channel currently and is not yet at the 138% external retracement level. The ES 2-Hr chart is below.

ES Futures - 2 Hr - Minute ((b)) Wave Up

 

From the Minor A wave up, there are three-waves down to the minute ((a)) wave. From there, there is a (y) = (w) wave upward, and the red Fibonacci ruler shows how precisely this fits. Following this (y) wave is an (x) wave - likely in the form of a triangle that we also mentioned - which is labeled (x2) for clarity. Thursday's new high confirms the upward movement has not ended yet. The makings of an 'a' wave of the (z) wave are in place, but it could go higher over the weekend.

At present the 'a' wave has found resistance at the mid-channel line sketched in. The most important item to note is that a larger downward move for minute ((c)) does not start until the 3,714 level - or (x2) - is exceeded lower. Again, Monday is the first trading day of the New Year, and Institutions may have to deploy directed cash as required. At some point, jitters over the attempt by Congress to hijack the election, or other moves by the current administration to block progress on a transition, may spark a 'b' wave pull-back, and this may be followed by an Inauguration Relief rally. It's hard to say, but it seems like a plausible scenario.

The minute ((c)) wave down might occur as the new administration gets organized, and therefore stalls, temporarily, and people lock in capital gains profits if the rates are seen to be changed. Minor B is shown as a 'placeholder only'. If this wave is an expanded flat, if can drop much lower than equality with Minor A (going to 1.62 or 2.62 x A, when added to ((b))).

But all of that is in the future: this is just how ((b)) waves work. First is to see if a triple zigzag completes properly. And on that score keep in mind that the 'c' wave of a (z) wave can sometimes truncate.

Thus, the steps in confirming a downward wave in progress for the minute ((c)) wave are, 1) trading below 3,714 to break the triangle lower, 2) trading below the (x1) wave, and 3) trading below minute ((a)). Until then, we remain highly flexible in market opinion.

P.S. This is the second post this weekend, and if you have not seen the first one yet, you may wish to review it now.

Have an excellent start to the New Year.

TraderJoe