In addition to everything else, SPY has a flat-bottomed ascending-top megaphone on its chart (red).
It’s putting in the usual right shoulder bounce off the megaphone bottom, and at the close on Friday was forming a top on the bounce before a move down through the red megaphone bottom.
The minimum move down is to the retrace target of the orange rising megaphone on the chart, which is at the level of the lowest touch on the bottom of the formation, or roughly 173.83.
That move will take out last Monday’s low, fulfilling last Monday’s NYMO set-up. When NYMO has a close below -100, as it did last Monday, it almost always follows up with a lower low. The red flat-bottomed megaphone, which would usually break out downwards, raises already high odds that we’ll see that lower low.
That’s where things get interesting. The target for a breakout through the red megaphone bottom is the height of the formation subtracted from the bottom, or roughly 149.24. And there are good reasons to think SPY will be going further, to the bottom of a larger rising megaphone at roughly SPY 125.
But if SPY and ES reenter the flat-bottomed megaphone, turning the downward breakout into a fake breakout, the target is to take out the formation high at 213.78. Essentially SPY and ES would be putting a megaphone right shoulder on the H&S on the chart, and the new high would become the head of a larger H&S.
I have to say that you usually wouldn’t see a higher high after the downward breakout from the orange rising megaphone. But a megaphone right shoulder after breakout, though rare, would be one of the few ways to do it.
Update: I forgot to mention above that if ES and SPY drop 5% or more after breakout through the bottom of the flat-bottomed, ascending-top red megaphone, it cancels the fake breakout set-up.
For example, if SPY breaks out through the red megaphone bottom and drops to 170, it can rally back through the red megaphone bottom without having a target of a new all-time high. All other things being equal, it would be a coin flip whether the price made it to a new high or just rallied into the body of the formation before dropping to a lower low.
So, once the price has dropped 5% or more after a breakout through the bottom, you have to determine targets some other way because this set-up is closed for new bets.