ES Ending Diagonal vs Head and Shoulders

ES Now has a Potential Ending Diagonal on its Chart as Well as a Potential Head and Shoulders

ES Now has a Potential Ending Diagonal on its Chart as Well as a Potential Head and Shoulders

In addition to topping megaphones within topping megaphones, ES now has a potential rising wedge vs a potential head and shoulders on its chart.  Either formation could break out upwards, which is why you stay long until the market gives an actual set-up to short, but usually we’d see a retrace here to at least the VWAP of the navy blue rising wedge at ES 1854.25/SPY 185.90.

After that retrace, the megaphone formations on the chart would require a bounce to ES 1925.50/SPY 193.  From there it could go either way.

There’s a clear Sornette bubble on the long-term ES chart that has formed since the 2009 low and usually that would require a retrace here to roughly 1350.  But maybe the market wants to extend the topping process before that retrace.

All Put-Call Ratios Lower

The SPY put-call ratio dropped modestly on a small rise in open interest.  Call volume was up slightly, put volume was down slightly.

The CBOE equities  put-call ratio also dropped modestly.  The CPCI had a huge drop from 1.35 to 0.77, well below its 20 dma.

Usually when all three put-call ratios are bullish together, prices move sideways or down.

Legal for Downward Breakout but No Decision Yet

ES is Legal for a Downward Breakout but Hasn't Made a Decision Yet

ES is Legal for a Downward Breakout but Hasn’t Made a Decision Yet

ES and SPY could break down immediately from here but you’d usually see one more wave up (green scenario) even if the breakout is going to be downwards.

The one-more-wave-up scenario would also mean that a downward breakout from the pink megaphone would be a breakout through the blue megaphone VWAP.  That’s a classic set-up with a topping megaphone within a topping megaphone.

The pink megaphone could also break out upwards after a retest of the blue megaphone VWAP–another reason why the green scenario is likely.

Melt-Up vs Correction Set-Up (Updated)

Sky's the Limit vs Correction Set-Up

Sky’s the Limit vs Correction Set-Up

SPY and ES have already started a megaphone top or continuation pattern at their VWAP target. If it breaks out downwards it’s a set-up to short. If it breaks out upwards it’s a set-up to go long again or stay long.

Any serious correction here will retrace to the pink megaphone VWAP at ES 1925.50 before it can turn into a crash. Any melt-up from here to a new high will retrace to ES 1955 before it can turn into a blow-off move.

Update:  Other set-ups to short would include a breakout downwards through ES 1935/SPY 194.  That one would be confirmed  with a break through 1925.50.  Also, if the price has a genuine breakout back into the correction’s falling megaphone, that would be a set-up to start a short.

SPY and ES at Target – Turn Here or Sky’s the Limit

SPY is at its Target - Any Higher and the Sky's the Limit

SPY is at its Target – Any Higher and the Sky’s the Limit

SPY is back at the VWAP of its 4-month red megaphone and retesting the bottom of its 3-year rising wedge (navy blue).

It could nibble a bit at the underside of the wedge (ES has a target a few points higher) or crawl up the underside a bit forming a top across that VWAP. But if it seriously breaks back into the body of the 3-year rising wedge, it’s in the head of a large head and shoulders formation. The initial target would be the top of the red megaphone, but after a retrace to VWAP, ES and SPY would be legal for an upward breakout from all formations on the charts.

A standard megaphone target would be in the SPY 220-230 area/ES 2200-2300. But the price could go into a vertical move that could go well past the standard target.

UUP Price Channel at Critical Decision Point

UUP has Formed a Price Channel (Pink) Across Its Silver Megaphone VWAP

UUP has Formed a Price Channel (Pink) Across Its Silver Megaphone VWAP

UUP has formed a price channel (pink on chart) across the VWAP of its topping or continuation megaphone (silver on chart).

The price channel is now at its critical decision point.

If UUP breaks out downwards from the price channel around here, it has put in the first wave of some kind of consolidation or topping pattern across the silver megaphone VWAP.

If UUP continues up to the top of its price channel, it’s setting up a melt-up to the silver megaphone top far far above.