By Ricky Wen
Overnight price action overshot to 2830 support on the Emini S&P 500 (ES), bottoming out at 2825.25, as price was oversold given the 100-point drop from the 2930s.
As of the regular trading hours open, the ES was around the same spot as yesterday’s closing price area of 2850, which coincides with our key 2850 level discussed below.
What is the bias/gameplan going into today?
For intraday purposes, we’re going into today as neutral-biased given the overnight reaction relative to our key levels, as the ongoing ferocious battle is still a potential trend change on the daily chart.
If we zoom out, we remain bear-biased going towards around 2650 per our 4-hour white/red line projections from earlier this week, but we are still waiting for more clues/confirmations. Bears need some sort of a day 2 setup to the downside eliminating the daily 20EMA trending support in a decisive manner in order to prove that the big, bad, real bears rotate back in town instead of gummy bears.
Fun fact, the bull train has bottomed out relative to the daily 20EMA trending support area every single time since the April 6, 2020 breakout, allowing us to catch and milk ES points and profits in textbook fashion. Will this time be different? We don’t know, but we are definitely prepared if and when the sh*t hits the fan. Otherwise, we BTFD at support again and keep milking this bull train.
For the next few sessions, the only thing that truly matters is whether price action maintains above 2850 or not on a daily closing basis. A breakdown below 2850 would be the first indication that big, bad, real bears rotate back in town, so we must stay vigilant.
FWIW, there are lots of market participants that are getting complacent as the market has been nearing the ES 3000 psychology number by grinding up since the March 23 lows, and now everybody and their mother has been accustomed back to BTFD and getting PTSD from shorting.
This is why I suggested last Friday that doing homework over the weekend was imperative as you have pre-determined levels drawn up so that you could react quickly, if need be, in the first few sessions/weeks/whatever. You are prepared no matter what.
What’s your sh*t hits the fan level? What’s your first clue? What are your major resistances? For reference, the past 2 week’s high = 2965, 2 week’s low = 2771. Decent range for now.
Ricky Wen is an analyst at ElliottWaveTrader.net, where he hosts the ES Trade Alerts premium subscription service.