Market Is Searching For A Bottom
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After moving sharply lower over the past several days we finally saw the market form a bottom and move up off of those lows. We have however retraced most of the move off of the lows and are now trading just about flat on the day. So while we are seeing some oversold conditions on the 60-minute charts we still have a bit more work to do before we can confirm that the market has indeed struck at least a local bottom and potentially a larger bottom heading yet again to new highs.
Zooming into the 5-minute ES chart we can see that we have poked over the initial pivot at the 5494-5518 zone to suggest that we may have already put in at least a local bottom. We have not however sustained that break thus giving us a more reliable signal that this is indeed ready to see a more sustained bottom. If we have indeed bottomed in all of the yellow wave iv I would want to see this break back over today's HOD at the 5533 level and then follow that up with a break back over the 5630 level. From there it is likely that we will see some twists and turns as we continue to push higher as we are still likely dealing with a larger Ending Diagonal pattern. As long as we the pullbacks to the downside remain corrective in nature we should however still be pushing for another higher high to finish off this larger degree pattern.
If we are unable to break back over the 5533 level before making another lower low then it would open the door for this to have formed a five wave move to the downside in leading diagonal form. This is of course not the most reliable of patterns so we still would need to see a clearly corrective move higher followed by a clear five wave move to the downside to have confirmation that we have indeed formed that five-wave move which is shown in red.
So while this market action is certainly more volatile than we had seen in the previous months we do have fairly good parameters to work with and we will continue to lay those out as we move through the market action in the days and weeks ahead.
