Market Report: Complex Just Became More Complex
The move from the June 2012 lows seems like an eternity with all the swings we are seeing, although I am sure it's causing pain to both bull and bears alike, I don't think anyone is immune to it.
To those traders that were trading back in 2008 some of you may remember the March-May 2008 rally, seeing the moves now reminded me back then, and I can recall a nightmare set of trading conditions we were trading back then.
You can see the similarities between the fractals and it's something I am watching, although I follow price 1st and fractals 2nd, but if price holds our key support then we must give some credit to this idea and the potential to move back above the July 2012 highs.
So if we have just finished point 6 then we could have a bit more upside to go, although this is simply an idea, and always open to adjustments, as is any idea.
ES VS 6C
One of the most important tools in my tool box is the relationship between the 6C (Canadian futures contract) and the ES (e-mini sp500 contract).
By using that combination it has found us many turns and swings over the past few years, as they simply follow each other step by step.
If you look at the 6C idea we are following, we can deduce that the decline is an impulse decline from the May 2012 highs, and a 5 wave decline can be seen and counted, and a clean positive divergence at the June lows.
From those June lows we can also deduce that we have seen a combination of sloppy corrective waves that give an overall corrective look against the backdrop of the 5 wave decline.
So what you have is a slow sideways choppy set of waves that have many overlapping waves, this is a characteristic of a correction.
It's hit the 50% retracement of the decline, so it's met a decent retracement.
Furthermore its channeling well enough for me to consider it still part of a corrective set of waves, although at this present juncture the jury is still out if we need to push a bit higher or we have topped as like all corrective waves they do their best to kick you off the next move and leave most traders standing out on the platform whilst the train has left the station.
Even using the basic of technical analysis we can call this a bear flag pattern.
Ok that's the 6C contract idea, so what has that really got to do with the ES contract? (remember the ES contract is the globex out of hours SPX market).
Let me show you another chart, then it should make sense.
As you can see they follow each other, so by using the 6C contract/market we can get an edge on the ES contract and thus the US stock market.
So as we are presently following some ideas on the 6C contract, we think that the ES is likely close to a high now or will do with a marginal push above the July 2012 highs.
From an Elliott Wave perspective I see nothing impulsive about the set of waves from the June lows, so favor that when the move is complete (if not completed already) we will see more downside.
We have been expecting a move of this magnitude back in June I wrote about the expected path the market should take.
The only difference between now and then is that the market instead of a straight forward 3 wave bounce it's now morphed into a complex set of waves. However I am still confident in our ideas going forward, as I think the 6C is a massive edge which many traders probably don't even know about.
Before I wrap up this report I want to also show you another market that could be a trade to follow by using the 6C contract.
Oil also moves in sync with the 6C contract and the ES contract, so it's all the same market, as one set of markets move so do the others, so find the high to the 6C contract, then I suspect the ES and Oil markets will follow suit.
So there you have some hidden gems that I personally use week in week out, buy watching the character of waves, we can look to use that information to build up a trading plan, if I am correct with my analysis of the waves, then I suspect a great move should be setting up.
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