A Healthy Consolidation

Toward the end of last week, the session was a consolidation as expected given the +3% V-shape bounce from 3740 into 3850s new all-time highs in the E-mini S&P 500 (ES), reports Ricky Wen of ElliottWaveTrader.net.

This is a healthy digestion because it allows rotation and another basing pattern for additional higher highs in the future. The trend is still rocking the daily 8/20EMA, as it has for the past few months, so no surprises until price action invalidates this bull train.

The main takeaway remains roughly the same. It’s been a healthy consolidation for the past few days, and it looks more of the same going forward. Price action is doing its thing with stock rotations as the S&P 500 index "stick-saved" against the daily 20EMA trending support/confluence area earlier over this week. The immediate V-shape recovery from ES 3740 into 3850s is fairly telling that there’s an insatiable bid underneath the market, so we’ll continue to monitor this for additional clues. 

Either way, looking at the bigger picture on the daily+weekly charts, it’s considered a bullish consolidation when above 3740 and weakness when below. As of writing, price action has made a 38.2% Fibonacci retracement of the rally from 3740 to the 3850s and is trying to base for its next assault attempt higher.

Summary of our game plan:

• Two Fridays ago, the market backtested into our 3740-3750 key support zone to shake out some weak hands, which represented the daily 20EMA trending support combined with the 50% fib retracement area of the entire rally from 3652.5-3824.50 (first week of Jan’s range).
• Price action +3% with a quick V-shape bounce into new all-time highs as a trend week up.
• As of writing, price action retesting 3814, 38.2% retracement of the entire bounce of 3859.75-3740.5 range. Price action hit the daily bollinger band highs and doing a healthy digestion.
• A sustained break above week’s high of 3859 would confirm 3878/3900 as immediate targets.
• Sustaining below 3810/3800 levels would open up immediate lower levels such as 3785/3773.
• On the higher timeframes, we’re still treating 3740 as low of the week. At this point, there should be no breakdown below this number given the trend week + powerful daily 20EMA bounce plus new all-time highs being established.

Ricky Wen is an analyst at ElliottWaveTrader.net, where he hosts the ES Trade Alerts premium subscription services.