ES/SPX: WEEKLY ANGLES – Candles/TA/Patterns/Channels/EW
Last few hours of Friday’s trading were decisive from the perspective of candles. I believe that bulls were able to make a statement and set the framework for the next week. I am viewing the next week cautiously bullish, with a bear shadow still hanging.
Let’s explore the hypothesis from various angles.
SPX (Candles charts)
The October candle DID NOT confirm the September Dark Cloud. In addition, it closed within the body of the last green candle. I continue to interpret this as moderately bullish in the near term. In order to fall into a long bearish trend, November needs to close below 3198.38. There are 2 more weeks to go.
This week completed with a candle that is not a Hanging Man. It could be a nice continuation combo if not that spike on Monday. There is some bullish pressure, but need to be cautious. The next week should add clarity.
The last two days formed an Inside Out combo that is viewed as moderately bullish. If ES advances next week, the top of the Monday’s Hammer, 3650, could be a strong resistance level. The odds are with bulls.
All Indices and Futures Daily Candles
All Indices and Futures daily candles could be interpreted as this: all but DJ cash index canceled an immediate bearish threat and are working on potential bullish combos.
Three gaps in DJ cash remain unclosed. The third gap in SPX was closed. Would DJ be powerful enough to pull all other indices into another corrective action to close the last gap? We should keep this in mind.
ES at monthly/weekly/daily is confidently traveling above 8 EMA. The other indicators I am tracking seem to be pointing towards further bullish continuation.
I examined the spike on Monday from the perspective of indicators combo that I use to identify the tops of the waves. It was a very clear message that this spike was either a top of wave 3 or a top of wave A. As I could not find a reasonable count to place an A on, I have changed my mid term operative count marking this spike as the top of 3 off the pre-election low.
Rectangle and Triple Top
There are two classical patterns fighting each other right now – the Rectangle formation and the Triple Top. If price breaks through the top of the rectangle, it should move fairly fast the height of the rectangle to approximately 3900. If the price is rejected at the top of the rectangle, a Triple Top would be complete and the price is likely to fall the height of the rectangle to the 2900 area.
The last week action hints towards the former. The spike on Monday was the break through, the last four days – backtest of the rectangle top boundary. If there is a conclusive advance on Monday-Tuesday, I would be expecting 3800-3900 in the next month or so (see the graphics on the Long Term chart).
I believe that the last week action produced a very nice pennant that, if confirmed upwards, would have 3860 is its target.
Based on analysis above, I updated the mid-term ES path. If the channel is accurate and fibs are accurate, there is a possibility of hitting 3700-3800 in this month. My operative long-term has changed either. The last week action invalidated my purple count. Now I have the red and the green that would support the breakout of the rectangle in both directions. I am leaning towards the red at this point.
If everything that I gathered and interpreted is accurate, Monday-Tuesday would be decisive for confirming the trend. If confirmed bullish, it could be a bull feast until at least the end of November. If ES reverses at this point, it could potentially lose 20% in a month or so.
Given the context, I think the bulls have a better chance, thus Cautiously Bullish.