An interesting fact concerning the Mother of All Bear Rallies that has unfolded since March 23 is that it has exceeded but a single ‘external’ peak on the daily chart: 2499.00, on March 25. Strictly speaking this puts the rally in jeopardy of rolling over — or rather, of continuing to roll over, following the April 30 recovery high at 2965.00. Assuming that is what is happening, the next plunge will take the futures down to p=2486.50. There is an alternative interpretation, however, that involves a rather finely nuanced question related to our Hidden Pivot rules. To wit: Is the March 10 peak at 2873.00 a legitimate ‘external’ peak? Strictly speaking, it is not, since the price bar on which the peak occurred has not exceeded the bar to the left of it. Even so, there is reason for treating it as a true peak, since it most surely constitutes a significant point of resistance to any rally. This would make the a-b rally shown in this chart an impulse leg — one capable of propelling the futures as high D=3177.50. I’ll go with the bearish case for now, meaning I doubt we’ll see a rally exceeding 2965.00, the so-far recovery high. (Be sure to check out my latest DIA tout, since it adds a bearish nuance to this analysis.) As a practical matter, however, there is no reason to be a hero by getting short at these levels with the intention of gutting it out come hell or high water. We’ll trade conservatively from either side of the market as conditions warrant, but with an eye toward shorting a top that could give us a play on the next huge downdraft. More immediately, bears should be prepared for frustration in the days ahead, since last week’s nerve-racking struggle failed to achieve the ‘d’ target of a relatively modest downtrending abc.
ESM20 – June E-Mini S&Ps (Last:2846.50)