MCM Newsletter – Outlook for Week 22-26 of May

Last week saw the return of volatility to the market. After 2 days of consecutive new ATHs on Mon-Tue, the market saw a big down gap on Wed, which finished more than 40 points lower than the previous close. Next day we got a lower low, followed by a rebound which continued on Friday. Despite the more exciting action, we are still in the 2320-2400 chop zone, so the market is keeping its options open. From an EWT stand-point the more complex correction (started at the ATH from March 1st) scenario is gaining more weight because of the side-ways action. This would mean a flat is in the works, with wave A at the 2320 low and B either done at the recent ATH or needing a new minor high to finish. Then wave C down should follow with new lows (below 2320). Because of the overlap of 2370, the bullish scenario now became very bullish, because the only option still on the table is for a nested wave up (two series of 1-2 waves). This scenario is lower odds, though, at least at the moment because of the side-ways action.

Weekly cycles are unchanged, but directionality made it to the lowest level. That is not a bullish sign.

Weekly Cycles

The daily cycles held the test of resistances and moved lower and triggered some bullish signals at the lows. ES had 2 consecutive LRE (lower risk entries) for longs, while YM triggered a new support level. Those pointed up, but unless ES also triggers a new support level, it is still expected for the previous resistance to hold.

Daily Cycles

The 288 and 480min cycles    
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