It's Best to See it As Probabilities

Here is the weekly chart of the ES futures contract with 100 weekly candles on it. A few notes have been made on the chart.

ES Futures - Weekly - Considerations

Starting on the left, the first move up "looks like" three waves. It might be 'five' but you really have to strain to try to make it so. I have shown a count which gets a (1) at the August 2020 high, but as I noted it was 'counting backward', and not in real time.

Next, moving up and to the right the whole wave sequence is extremely choppy. It is truly difficult to find broad expansive impulse waves up. There are a few small gaps but nothing eye-opening. As we know, the whole wave was built on FED stimulus. Now that the stimulus is slowing down, the wave structure has turned lower. This is significant rationale for the Primary ((B)) wave count. It is false in that it is not economically driven.

The latest downward wave is the largest correction on the board, now in terms of both price & time - even if the wave is considered a flat wave from the September 2021 high. That's not fatal for an upward count but it is a warning sign as the downward portion only ..not considered as a Flat.. is the longest downward wave since the March 2020 Covid low.

Next, on the right-hand-side of the chart is the Fibonacci ruler. We see that if you consider the up wave since Oct/Nov 2022 as a third wave, this down wave is not yet a 38.2% retracement. That is actually a positive for the 'five-waves-up' count, but it is one of the few.

Finally, on the lower left is shown that the Elliott Wave Oscillator has absolutely no sign of a second wave dip. 'Usually' - most often - second waves on the EWO show a dip very near to the zero line when there are 120 - 160 candles on the chart. This is completely absent from the pattern of the EWO shown.

So, those are the factors for-and-against a five-wave-up count versus a Primary ((B)) wave count - besides the condition that a line from 0 - (2) would break a third wave, actually several times. This is a matter of probabilities and circumstance as to which occurs. By circumstance, I mean that the FED could decide it must relent and not raise rates. So far, we have not heard such. As a matter of probability, we must be open to the possibility of a higher wave. IFF a diagonal forms properly (it has in the Dow futures, it has not yet in the ES futures), then it is the post-pattern behavior which will confirm a leading diagonal or clarify that it was only an ending diagonal. This is the only item that matters - not my opinion or your opinion. The market must eventually make the call.

Closer in, the ES two-hourly chart, below, indicates the count that might work to the lows.

Today's rise was sufficient to risk invalidation. From the angle of attack, it looks like last night was the third wave. That leaves a fourth and a fifth wave to complete. One way to form an impulse wave lower is to form a triangle wave iv, followed by a fifth wave lower. Again, we don't know this will occur, but the triangle's ((e)) wave could possibility eliminate overlap with wave ii. The EWO seems to indicate wave iii did occur last night, and the EWO is currently headed back towards the zero line.

In light of the first chart in this post, note how wave ii did have its EWO pull back well-toward the zero line. The thinking reader needs to ask, "why doesn't this happen on the weekly chart?".

Have a good start to your evening.

TraderJoe