Anyone reading my blog posts lately knows I’m expected a rather turbulent end to this large B wave to the upside.
It’s seemingly never-ending but I think that’s just to add to the overall market complacency. Expect a turn down mid week.
We have the spring equinox on Tuesday and the latest Federal Reserve announcement on Wednesday at 2PM EST. It’ll be interesting to see if they raise rates. It doesn’t matter to the market, because it’s already determined what it’s going to do.
So, I’m still looking for a regular flat top in ES/SP500 and an expanded flat top in NQ/NDX.
The Big Guys are Losing Steam
Above is the daily chart of Tesla (TSLA). I’ve shown this chart before and there’s little change, other than the fact that’s it starting to move lower. This puts Tesla in the third wave to the downside which should bottom below 208.91.
Above is the daily chart of Facebook (FB). After completing an ending diagonal and an apparent first wave down, we’ve been stalled out at the top of the second wave (at the 62% retrace level. If we’ve indeed topped, we should see a third wave down with the drop C wave drop we’re expecting in the US indices.
Regular and Expanded Flats
The pattern tracing out in ES and the SP500 seems to me to be a regular flat. Here’s an description of the traits of a flat (from the Elliott Wave Principle):
“A flat correction usually retraces less of the proceeding impulse waves than does a zigzag. It tends to occur when the larger trend is strong, so it virtually always precedes or follows an extension. The more powerful the underlying trend, the briefer the flat tends to be. Within an impulse, the fourth way frequently sports of flat while the second wave rarely does.”
Regular Flat (below)
Above is a chart showing a very simple drawing of a regular flat. Think about the large fourth wave in ES that we’ve been tracing out since January 29. The BULL Market wave on the left in this diagram relates to the probable pattern we have unfolding.
The first set of waves down from the 2875 area was in three waves (a zigzag). This is the A wave of the flat.
The wave up from about 2530 is also in three waves. This is the B wave of the flat, and it’s not quite complete. My target now on the upside should be above 2850 in ES and a 2838 in the SP500. A turn down into Wave C that traces out five waves will complete the pattern (3-3-5).
Expanded Flat (below)
The only difference between a regular flat and an expanded flat is that in expanded flat, the B wave goes to a new high (the pertinent diagram is the one on the left, for a bull market)
Summary: We seem to have a regular flat in progress in ES and an expanded flat setting up in NQ. Look for a final rally into perhaps midweek and then a sudden turn down into the C wave. The C wave in both flat patterns will drop to a new fourth wave low.
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The Market This Week
Here's the latest daily chart of ES (emini futures)
Above is the daily chart of ES (click to enlarge, as with any of my charts).
We're looking for a top in the B wave of a regular flat this week (after one final leg up to a new B wave high and above the 90% retrace level — measured from the all time high). That 90% level is 2850 in ES.
The flat is still the best option for both ES (regular flat) and NQ (expanded flat).
Expect a turn up either this weekend or Monday. Then expect a top perhaps in conjunction with the Federal Reserve announcement on Wednesday. The medium term projection is for a new fourth wave low in a C wave down.
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