What’s going on is that ES needs to work its way back to the critical decision point at 1890, but the bears don’t believe it.
Traders are in the same state of mind as they were back at the top, when they were creating chop by buying every little dip on the 2-minute charts, except in reverse–they are now selling every pop on the 2-minute charts.
Yet ES has not taken out yesterday’s low. Instead it spent the day megaphoning across VWAP of a likely bottoming megaphone, working it’s way slowly higher.
The key to the next big move is the price action at 1890. A big megaphone struggle there that is won by bears (navy blue scenario) would complete a big continuation triangle that would likely break out downwards with a target of roughly 1650.
A melt-up through 1890, or a small, fast struggle won by bulls, would make the Sornette melt-up set-up the favorite (purple scenario).
A small, fast struggle at 1890 won by bears won make the green or bright blue scenarios most likely. The green scenario is a prolonged megaphone move. The bright blue scenario is a larger inverse H&S bottom.
The green and bright blue scenarios would both take ES down past the January 20 low, but within a set-up that’s unlikely to let the price travel far enough to confirm a bear market. Instead, both would be a more prolonged way of launching a blow-off top.