ESZ5 Daily chart

ES had a strong rally for a 4th day and closed yesterday just below the 50-day moving average line. The price action was bullish, but the volume was lighter than Friday.

Now the 1972-67 zone becomes a key zone for the ES. For the upside to continue, this zone has to prevent the ES up from falling. Otherwise ES could retrace down to the 1940 area to fill yesterday’s unfilled gap at 1943. But even if it retraces, the ES still can bounce back up to that key zone area again.

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Download the full trading plan here: 151006.pdf

If ES has a retracement during overnight trading, traders should look for support at 1938-35.50 to see if ES can be held up or not. Usually after a big gap up day, it should take one or two days to move back and fill that gap before ES resumes its rally.

Based on Elliot Wave, the primary declining wave 1 ended at 1831 level on August 24. Current movement could be an a-b-c sub-wave of wave 2. To complete the c or wave 2 top, ES needs to hold above 1900. In the short term the trend is up, and market sentiment is bullish and favors the upside. But the algos will be looking for opportunities to run the stops on both sides; they don’t care about market sentiment.

Outlook

Short-term === Bullish;
MEDIUM TERM === Bearish;
LONG-TERM === Bullish

Support and resistance

The major support levels: 1928-29.50, 1900-03.75, 1880-75, 1850-45,
the major resistance levels: 1998.75-95.50, 2012.50-14.50, 2025-32