- Main Trend (weekly): neutral
- Intermediate Trend (daily): up
- Short-Term Trend (60min&135min): down
- MSP for the week: down
As highlighted in the previous newsletters, the past week proved to be decisive in the main trend confirmation or reversal. Both ES and YM reversed their down impulse, by getting a resistance level (point 1 on the chart) which triggered above the previous (broken) support level (point 2 on the chart). The appearance of this resistance level has 2 important implications:
1.The impulse down is now reversed, and the weekly cycles are just oscillating (moving in regular waves)
2.The resistance is expected to be quite strong and the normal expectation is for the market to head lower in the next 2-3 weeks until a support level is triggered, if the oscillating nature will hold.
So despite having reversed the down impulse, the market is still expected to head lower in the next weeks. If that does not happen and the market can push through resistance, triggering an impulse up, that would need to be respected. Either way, the resistance levels triggered (2110.5 on ES and 17907 on YM) are now important levels to watch.
The daily cycles are still impulsing up and are currently back-testing their break-out level at 2015 ES and 17100 YM. In the last newsletter we were mentioning ”In the context of the weekly cycles this back-test becomes even more important and is not totally unreasonable to keep an eye out for it next week, considering the MSP.” That is still valid and it is important to see if the market manages to bounce and hold the impulses up or it reverses. The daily is also showing LREs for longs (lower risk entries), so at least a short term bounce is the normal expectation. If the market doesn't even attempt to bounce from around these levels, that would have very bearish implications.
The 60 and 135min cycles had a significant development also last week. After we pointed out in the week before that they had finished their up impulses with a 3rd END (point 1 on the 135min chart, the 60min is too far back and cannot be seen) they oscillated for a bit and then both broke into down impulses (point 2 on the chart). An additional interesting point is that the 135min cycle had some LREs for shorts (Lower Risk Entries) - point 3 on the chart. These lived up to their name as market retreated quite significantly from there. For next week, considering where the daily cycles are, we could expect some sort of bounce to get a BR (Bearish Retracement), since the impulses down are now clearly established. We will be looking at the shorter time frame cycles (1,2,5 and 15min) for clues if that will play out, since they are fractals of the 60 and 135min cycles, and would normally break into up impulses on such a move.
The MSP signaled very accurately the significant inflection point which came up in the market. Perfectly in line with the 1 week left translated MSP, which correctly identified also the bottom back in October, the market peaked in the indicated time window and lost close to 100 points from there. We draw the attention again that now there is bias for weakness for the next 3 to 4 months. This does not mean that there will not be any bounces. It simply means that it is likely that an important intermediate term top was put in and that the character of the market changed, favoring weakness.