ES at Critical Decision Point

If ES can Take Out Yesterday's Low From Here, It Will Confirm the Bright Blue Falling Megaphone

If ES can Take Out the Overnight Low From Here, It Will Confirm the Bright Blue Falling Megaphone

If ES can take out the overnight low from here, it will be confirming the bright blue falling megaphone, which ought to get the price back to roughly the 2125 VWAP level of the pink and navy blue megaphones.

ES would likely break out of the falling megaphone there for at least a retrace of the formation, and the move could continue up to a new high and continue chugging up all the way to 2300+ (green scenario).  The blue scenario represents a drop to the bottom of the pink megaphone after the falling megaphone is retraced.

If ES cancels the bright blue falling megaphone with another move to the pink megaphone top from here, it could keep megaphoning its way to a retest of the pink megaphone VWAP and then break out upwards, or it could break out of the topping megaphone downwards into a drop to the pink megaphone  bottom (purple scenario).

Oil Appears to be Holding Up ES

Oil is Headed to the Top of the Triangle Right Shoulder on its Inverse H&S

Oil is Headed to the Top of the Triangle Right Shoulder on its Inverse H&S

Oil is surging for the neckline of its inverse H&S but it needs another pullback from it to complete a triangle right shoulder on the formation.

The pullback doesn’t have to be all the way to the bottom.  The target for a breakout from the inverse H&S would be roughly 78.

The market’s excited about OPEC pretending that it will cut back production in January, but typically there would be no actual cutback and everybody in the business knows it.  So there’s still a good chance of the inverse H&S morphing into a triangle before a lower low that would set up a bigger inverse H&S (purple scenario).

QQQ is taking another hit today, but ES seems to be held up by oil.  The best chance for a December dip in ES should be when oil reverses off the inverse H&S neckline.

If oil breaks through the neckline here without a pullback, it’s likely just going for the blue megaphone top before a move to its bottom to morph the triangle right shoulder into a megaphone right shoulder (not drawn).  That’s another way of setting up a larger inverse H&S to take out the January low.

QQQ Long-Term Rising Megaphones

QQQ is Working on Topping Patterns for Two Long-Term Rising Megaphones

QQQ is Working on Topping Patterns for Two Long-Term Rising Megaphones

QQQ is working on a topping pattern for a move within a larger topping pattern within a still larger topping pattern.  It’s forming major tops for two multi-year rising megaphones on the daily/weekly charts (blue and red on chart).

All topping patterns are tricky to trade because it’s so common for them to morph into different topping patterns.  Rising wedges constantly morph into rising megaphones, head and shoulders patterns morph into megaphones, triangles morph into H&S tops and megaphone tops morph into rising megaphone tops.

There is nothing to be done about this but wait for a topping pattern to complete in such a way that a price is a favorite to get moving down on a move that’s likely to be big enough to offer a decent reward on a trade.  Until then you stay long or get long on upwards breakouts from consolidations within the patterns.

So, while QQQ could form a small quick megaphone or H&S top here that is the top before a move that takes the price back to 40 (green scenario), QQQ could also shoot up higher to complete a rising wedge or rising megaphone top before that move, and it could postpone that move by forming a larger megaphone top up here (purple or pink scenarios).

ES Megaphone Top vs Continuation Pattern on 60-Minute Chart

Dip vs No-Dip Scenarios on the 60-Minute Chart

Dip vs No-Dip Scenarios on the 60-Minute Chart

ES is working on a small megaphone top (red on chart above) for a pullback to at least 2125 and possibly 2050 or even 2000.  But ES is forming this megaphone close enough to the August high that this could be a false top within a larger megaphone (red on chart below) on the daily chart.

If ES Can't Pull Back Here, It Could Run to the Red Megaphone Top

If ES Can’t Pull Back Here, It Could Run to the Red Megaphone Top

So even though it’s a good time for a quick pullback, you have to watch out for an upwards breakout from the little megaphone that could set off a melt-up all the way 2300 or beyond at the big megaphone top.

Upcoming Dip on the Daily Chart

There's Strong Support at 2050 for the Coming Dip

There’s Strong Support at 2050 for the Coming Dip

ES is topping for a trip to its pink and navy blue megaphone bottoms. But the bright blue rising megaphone bottom and red megaphone VWAP at 2050 should provide strong support.

Typically both lines would get broken a bit by some kind of bottoming formation for the dip.

The green scenario represents a vigorous move up into the head of a head and shoulders top before a bigger move down to retest the January/February lows.  I’ve drawn a move up to the top of the blue rising megaphone but if it’s fast enough the move could easily break through to put a topping pattern on top of the formation.

ES will be a favorite to melt up to another new all-time high after the larger correction to roughly the January/February lows.

Topping for Dip

ES ES has Broken Out of Its Price Channel & Rising Megaphone Tophas Broken Out of Its Price Channel & Rising Megaphone Top

ES has Broken Out of Its Price Channel & Rising Megaphone Top

ES has broken out of its price channel and rising megaphone top (bright blue). But it broke out of the rising megaphone top before completing a head and shoulders inside it.

It has now drawn a small H&S top (red neckline) with a right shoulder that’s a retest of the rising megaphone bottom. It could break out of the H&S quickly for a fast move down, but usually with this type of breakout ES would dawdle around up here a while forming a megaphone top.

ES must retest at least 2125 before it’s legal for much more of a move up (orange scenario).  But it’s a strong favorite to take out the election crash low on this dip.  Then it could continue down after a retest of 2125 (purple scenario), but it’s more likely to break out upwards from the pink and navy blue megaphones (green scenario) to complete a rising megaphone on the daily chart.

Working on the Top of the Top before a Trip to 2000

ES is Working on a Rising Megaphone Top for its Red Thanksgiving Price Channel

ES is Working on a Rising Megaphone Top for its Red Thanksgiving Price Channel

ES keeps traveling up its weak little Thanksgiving price channel (red), but it’s already started forming a rising megaphone top inside (gray). These formations tend to top with a head and shoulders that breaks out at the same time as the rising megaphone.

That would be a set-up for a short to at least the blue megaphones’ VWAP at 2125 and more likely the bottom of the navy blue megaphone at roughly 2000.

From 2000 ES would have to return to VWAP of the navy and bright blue megaphones for a decision on whether to melt-up to another new high (green scenario), reverse into a retest of the January/February lows (purple scenario–unlikely), or start a new megaphone across VWAP (pink scenario) that would likely ultimately form a triangle that would break out upwards.

The green or pink scenarios would be strong favorites because ES has a rising megaphone on its daily chart that it needs to complete with a strong move up to significantly higher highs.

ES Price Channel in Critical Decision Wave

ES has Confirmed a New Small Price Channel (Red), Now in its Critical Decision Wave

ES has Confirmed a New Small Price Channel (Red), Now in its Critical Decision Wave

ES has broken through 2184 in low-volume Thanksgiving week trading but it used a small price channel (red) to do it. The red price channel is now in its critical decision wave, where it either sets up a breakout into a melt-up (purple scenario) or starts a top.

Because ES failed to retrace to the orange megaphone VWAP before breaking out, it’s more likely to form a top (green scenario).  I drew a head and shoulders top on the channel, but the top could also form a megaphone, rising megaphone, or rising wedge.