Yesterday S&P 500 futures (ES) dropped $10, and as expected bounced in an important bound of a channel that confirms the local top and wave 2 targets. Overnight, ES held 2164 and failed to move higher - a good sign for our bearish scenario.
ES Futures 4H Chart - July 26, 2016
In the chart above, ES is holding at 50SMA (blue line) and the indicator below shows how the buying power and momentum clearly vanished from every move up the market did. There are two important Fib retracement levels shown in this chart:
- The entire rally retracement - right one
- 2080-2170 rally retracement - left one
It will not be that easy to ideally complete wave 2 due to the strength of the trend (medium-long term), but wave 2 might aim 200SMA in 4h or the 38% retracement level (right one).
Invalidation level for this scenario remains the previous high.
ES Futures 1H Chart - July 26, 2016
In the 1H chart, we can have a more clear idea of the importance of 2155-2160 level. A breach below 2151 will confirm the local top and the start of wave (a) but usually wave (a) tends to be "bouncy" and not that easy to hold a position for too long.
The main target for this wave (a) is 2143.
S&P 500 (SPX) 1H Chart - July 26, 2016
Gann level 1x1 is holding SPX price, and a move below will aim towards the previous wave I (orange) or the lower-bound of the green channel.
It is important to observe how market will behave if 2151 (ES) is broken and the structure of wave (a) (2nd chart).