Market Sees (Big) Day of Consolidation
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It’s not often that a 6% intraday move is classified as a consolidation, but given yesterday’s extraordinary spike higher, today’s action appears to be just that—corrective in nature, rather than impulsive. The magnitude of yesterday’s rally expanded the trading range significantly, which makes today’s sizable pullback feel more contained than it otherwise might.
Despite the sharp move lower, the structure of the decline is clearly corrective, unfolding in three waves off the highs rather than five. As long as we continue to hold above key support levels, my base case remains that we’ve likely struck a local bottom at yesterday’s low and are now in the early stages of a move higher. Whether that move ultimately results in new all-time highs or is simply part of a broader corrective structure remains to be seen. The character and structure of the next significant downside move will offer more clarity on that front.
Zooming in to the smaller timeframes, the ES chart shows a clean three-wave retrace off the highs, terminating right at the 61.8% Fibonacci retracement level. That reaction is a constructive signal that we may have completed wave (b) of a larger corrective rally. However, for confirmation, we’ll need to see a sustained move through the 5447–5496 resistance zone. Should price push through that range, the next key pivot will be the 5574–5675 zone. A breakout above that level would set the stage for a potential test of the 5838 region—the 100% extension of the initial rally off the recent lows.
From there, the structure of the subsequent move down will be critical. It will help determine whether we are entering a larger wave C decline under the red count, or if there’s still room to push higher toward a final top along the yellow path.
For now, I’ll remain focused on the lower timeframes for confirmation signals, with an eye toward determining whether this week’s low marked at least a local bottom—and a potential pause in the broader downside pressure we've seen over the past couple of months.
