The FED week was a good omen for the bulls and the market finally managed a small break-out above the choppy range in which it was stuck for a few weeks already. We had several short term cycles break into up impulses on mcm, which provided early clues about this ramp.
Coming back to the big picture, the weekly cycles show a dangerous development for bears. The back-test of the 2105 break-out level appears to have held. The market bounced from there and if it will continue to go higher that will be a situation in which shorts would have to be patient for quite a while. YM continues to underperform, however it bounced when it met the mcm-MA and now managed to get above the broken resistance also. The bears do have one more chance and that would be to reverse this bounce rather directly. The fact that the directionality tool is still heading down is also a sign that the back-test is not decided just yet.
The daily cycles are the reason why we are not fully in the bullish side just yet. They unwinded the big up impulses started back in March. YM completed that unwind (with a 3rd END resistance), while ES only had a 2nd END and could still (theoretically) get a 3rd END. In the mean time, they broke below support and actually started down impulses, although now the price came back above that support. So bears have 2 options here. One would be a direct reversal, which would mean the back-test of the previously broken support held and the down impulses are confirmed. That would be very bearish. The 2nd option is for the market to go higher and reverse after ES triggers the 3rd END resistance. As we can see on YM, that 3rd END doesn’t necessarily require a lot of upside to trigger. Once that happens, reaction to that resistance will be critical. If the bullish scenario on the weekly is to be confirmed the market could break into a nested impulse on the daily. But the normal expectation is for downside from there. As always, the shorter term cycles will provide early clues into which scenario will play out.
The Elliott Wave projection of the NYSE is also pointing to a crossroads with regards to market direction. With minimum expectations of the structure being met, waves one and four overlapping, the market is free to do as it sees fit from here. The duration of the fourth wave seems to be lacking taking into consideration that from a seasonal perspective, most bottoms aren't put in place till sometime on or after the second week of October. While the projected paths are very insightful as far as targets and bias is concerned, the fact that markets don't go in a straight line as the projections do makes for a challenge. Keeping that in mind, although we've bounced in what appears to be the final leg up to new all time highs, there is a very good potential this is just a counter trend move that has the potential to bottom at 'or 2' into the month of October. Best to your trading this week.