There's a very interesting scenario on the ES daily at this point. While this has broken resistance pointing to the upside target at 1266, there are potential intervening factors to consider. The following chart may look complicated, but I think it will make sense in just a minute! The green target level was derived by multiplying the swing from the August 31st high to the October 4th low by 1.272 and projecting upwards.

Click on image to enlarge!

This calculation is shown with the red trendlines. The resistance in bold red is a measurement of the August 9th low to the August 31st high, projected from the October 4th low. This level, right above the current high, measures the rhythm of the downtrend. As long as this remains intact we may see the start of an additional move to downside.

Ordinarily I’d focus on the idea that this resistance level can only provide a temporary hold given the active upside target. But there is a timing factor to consider too. If you check the top of the chart, you’ll see a series of bar counts representing the duration of prior rallies. 6 bars, 4 bars and yesterday was bar number 6 once again. Since this hasn’t exceeded the number of bars in at least one prior rally, the rhythm of the decline hasn’t been broken in TIME either. The lines below price confirm this; yesterday and today as prime Fibonacci timing resistance factors too.

So will this resistance be serve as just a speed bump before we disrupt the downside pattern and see the upside target for a start? Let’s see if we can continue to rally through this price and time resistance. The answer should become apparent by early next week. Either the ES will continue to drop from here, or the resistance will be just a temporary obstacle with a break once the timing factors clear over the next few days.

For more from Mark including his “Chart of the Day”, visit MJBraun.net.