Monday's action retraced all losses from Friday as the Emini S&P 500 (ES) formed a double bottom during Sunday night at 3650 key level. The next two sessions will be pivotal in confirming whether it's risk on again or whether we need to wait a bit. Right now, bears are losing the battle before price action is back to neutral mode given the V-shape recovery into 61.8-78.6% retracement of the 3860s-3650s range.

The main takeaway is that this is healthy consolidation in the bigger picture because it allows the market to reset and take out some novices and shake the tree a bit. It clears out the newish traders that keep on buying calls and getting paid easily for the past few months. It ain’t gonna be as easy and simple as that going forward. At least not until price action confirms the stabilization/higher lows. During Sunday night, the market held the 3650s and formed a temporary double bottom setup. This was no surprise because we’ve been saying the 3650 area has been a key level for the past few weeks. It is the confluence of the January monthly lows.

What’s next?

Monday closed at 3763.75 in the ES as the low to high range since Sunday was +120 points or +2.95%. Bears are facing a V-shape recovery and extinction risk again. Feels like déjà vu so let’s see what happens here at 3800/3820 key resistances. Let the price action dictate your actions. Know your timeframes

Summarizing Our Game Plan:

Price is back to neutral mode and starting to turn bullish as short-term bearish momentum is failing and bears are facing another extinction risk given how price action has been reacting since the Sunday 3650s temp bottom…another V-shape recovery thus far.
Given the price action clues from Monday Feb 1st, the market has temporarily stabilized by a double bottom of the 3650 pre-determined key level. If you recall, it’s the Janurary monthly low and also our shit hits the fan level.
Market has retraced all of Friday Jan 29th losses and now looking to reclaim 3800 and 3820 to double confirm that the 3650s bottom is likely in and the train is back on its way towards 3976.
Reclaim = a daily closing print above 3800, followed by 3820. Could do it today or need a couple days more consolidation. Wait and see as bears will try their hardest to disallow the push above 3800 for today’s intraday.
If bulls fail this feat then price action is still stuck between the current range of 3820-3650 or the smaller range of 3800-3700 that we identified from yesterday’s report/charts.
Again, this is a day-by-day market now as price action remains below the trending daily 8/20EMA resistances so we gotta be nimble and adaptable with the adjusted volatility.
This is going to be a large rangebound market for the forseeable future, so treat as 3650-3820 bigger range and smaller range 3700-3800. Know your timeframes as this is being treated as a shakeout on the weekly chart before price action could confirm a stabilization event to move into new all time highs again (3900+).
Mainly watching 3800 key level this morning, if above it, opens up 3820 then 3830.
Below 3800, opens up a backtest into gap fill 3768 also known as Monday’s closing print area.
Both sides are tradable in this overall range as volatility creates many great opportunities.

See charts on Emini S&P 500 that accompany this article.

Ricky Wen is an analyst at ElliottWaveTrader.net, where he hosts the ES Trade Alerts premium subscription service.

© 2021 Copyright Ricky Wen - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Only logged in users are allowed to post comments. Register/ Log in

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2024 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.