QQQ Rising Megaphone Top Will Clarify Where We’re At

QQQ Rising Megaphone Top (Red) Completion Scenarios

QQQ Rising Megaphone Top (Red) Completion Scenarios

QQQ broke out the top of a rising megaphone topping formation today (red on chart).

This formation requires a retrace to its base, which will put a potential head and shoulders top on the chart.

But before retracing to its base, the rising megaphone would usually complete with either a head and shoulders across the formation before the breakout downwards (green scenario), or a rising megaphone top along or across its top (purple scenario).

A retest of the formation top that bounces off it to a new high sets the purple scenario in motion.

A reentry into the formation and retest of the top that keeps the price inside sets the green scenario in motion.

ES End of Day Rising Wedge

ES Closed Completing a Late-Day Rising Wedge (Pink)

ES Closed Completing a Late-Day Rising Wedge (Pink)

ES finished the day completing a little rising wedge (pink on chart) on the bounce off 2109ish.

That puts a little head and shoulders on the chart with a rising wedge right shoulder.

The little rising wedge should break out downwards and megaphone a bit more Sunday night before breaking out downwards through the H&S neckline and completing a dip to 2100ish.

That dip should be a buy for run to another new all-time high.

It’s all about simultaneously completing a megaphone top on a megaphone top and a rising wedge top on a rising wedge top.

The whole thing should create a beautiful set of nested head and shoulders patterns for a tumble.

ES Rising Wedge vs. Megaphone Top

Megaphone vs Rising Wedge Top - We'll Probably See Combo of Both

Megaphone vs Rising Wedge Top – We’ll Probably See Combo of Both

So ES has put another rising wedge (pink) on its chart, within a lot of other topping formations.

It’s probably going to form a small rising wedge top across the bottom of this new rising wedge.

Then after it completes that, it will probably megaphone some more up here, creating a larger rising wedge around the little pink rising wedge.

So, I’m actually expecting this topping process to complete with a combo of a little rising wedge climb up the bottom of the pink rising wedge, to be followed by the purple megaphone to eat up time until the FOMC announcement.

The longer view is that a major top is forming.

Longer View is that a Major Top is Forming

Longer View is that a Major Top is Forming

Another Rising Megaphone Top

ES has Formed a Rising Megaphone Top (Pink) on its Rising Megaphone Top (Bright Blue)

ES has Formed a Rising Megaphone Top (Pink) on its Rising Megaphone Top (Bright Blue)

ES has broken out of its triangle, but it broke out in the context of forming a rising megaphone top (pink) on its rising megaphone top (bright blue).

Now the little pink rising megaphone top needs to form a top. This top could be a sideways move that takes it to the bottom of the megaphone for breakout, or it could be another rising megaphone top inside the formation or across the top of the formation.

Rising megaphones are a sign of excess bullishness (in the present case, they’re signs of short squeezes).

ES has now reached the level of its former touch on the top of its big topping triangle (orange in today’s earlier post).  So it would usually pause for at least a sideways move here, and it could put in a false top before a retrace to the megaphone VWAP at 2080, then a melt-up to the real final top.

So the pink rising megaphone is the key to the next little short-term move–false top & 2080 then up vs just continuing up.

ES False Top Before Real Top

ES is Likely Putting in a 5th Wave False Top on its All-Important Blue Topping Megaphone

ES is Likely Putting in a Classic 5th Wave False Top on its All-Important Blue Topping Megaphone

As a general rule, a trading instrument should complete all trading formations on its chart.

One of the many topping patterns on the ES chart at the moment is the blue megaphone on the chart above, which is a topping megaphone within a larger topping megaphone.

The final wave up in a topping megaphone often puts in a false top at the level of the previous touch on the megaphone top.  I believe that’s what ES is doing here.

The false top usually retraces to the megaphone VWAP, and then breaks out upwards in a melt-up to the formation top.

The topping pattern that forms up there is usually the final top for that megaphone before it breaks out downwards.

The 10-Year Looks Like It’s Steeling Itself for a Drop

ZN is Crawling Along Its Pink Potential Rising Megaphone Bottom - Would Usually Break Out Downwards to Red Megaphone VWAP

ZN is Crawling Along Its Pink Potential Rising Megaphone Bottom – Would Usually Break Out Downwards to Red Megaphone VWAP

The 10-year looked like it was setting up a rising megaphone (pink on chart) for an immediate move to a new all-time high (green scenario).

But now it’s crawling along the bottom of that potential formation in a menacing way.

Usually this kind of crawling would lead to a breakout downwards, cancelling the formation.

If that breakout occurs, ZN should retrace to the VWAP of its red bottoming megaphone at roughly 127, putting a potential triangle (orange) on the chart (purple scenario).

The 10-year should break out upwards from this triangle to morph it into a head and shoulders or even a larger rising megaphone top.