By Ricky Wen, ElliottWaveTrader.net
The last week of June was quite weak as the stock market continued the downward momentum from the 3rd week by grinding down into the major weekly trending support zone around 2700-2720 on the Emini S&P 500 (ES) for the backtest.
After Monday's steep sell-off, the rest of the week was mostly consolidation within Monday’s range. The main takeaway from the week was that the market made a temporary bottom setup with the nominal lower low at around 2693 on the ES and back into the 2740 area resistance. It is now waiting for some follow through this week, or invalidation if that was not the low.
Friday closed at 2720.75, and it was a doji candlestick (open and close virtually equal) that was fairly weak for a monthly and quarterly close when considering the intraday high was 2745.50.
Heading into this week and July, we're treating the 2693.25 level as the temporary low and looking for some follow-through to the upside going towards 2780-2800 for the bigger picture perspective.
This thesis remains valid when above 2700, as below that level would be considered way too deep of a retracement for the consecutive higher lows and higher highs that we're expecting.
Conversely, below 2700/2712 would start to open up the odds for the market to re-attempt that 2680 level again. If you recall, 2680 is the next significant support we have underneath 2700 that the bears failed to accelerate into last week as the market "sticksaved" at 2693.25.
For now, our 4-hour projection chart remains our thesis, and we'll adjust if needed if or when market demonstrates a different picture.
Ricky Wen is an analyst at ElliottWaveTrader.net, where he hosts the ES Trade Alerts premium subscription service.