Close-Up on Today’s Move

ES Formed a Price Channel Today Topped by a Head and Shoulders

ES Formed a Price Channel Today Topped by a Head and Shoulders (Pink Neckline)

ES formed a late-day price channel (blue in chart above) that topped with a small head and shoulders (pink neckline on chart).

Some Possible ES Topping Scenarios

Some Possible ES Topping Scenarios

The channel and small head and shoulders carried the price back up to the top of the extended topping megaphones within topping megaphones, as well as to the retrace target for the purple falling megaphone created into the October 15 low.

The price could retest the first rising wedge bottom (bright blue) and reverse there for a fast plunge to the purple megaphone bottom at around ES 1955/SPY 196 (green scenario).  Or, it could start megaphoning here and then break out downwards from the megaphone (purple scenario).

Or it could just keep heading up for a breakout through the megaphone tops and form a topping pattern with a neckline at or across those megaphone tops.  That topping pattern could be something like a head and shoulders or it could be a rising megaphone sitting on top of the other megaphones and carrying the price a lot further up over a period of weeks.

I can’t fit every scenario on the chart, but in general the play is to stay long until either a breakout downwards from a complete small topping pattern up here, or wait for something like a downward breakout from a larger topping pattern with a neckline near ES 1955.

The price could also correct here, consolidate for a while, and end up breaking out upwards from the consolidation into a melt-up.  In that case, we’ll probably see something like a head and shoulders form with a neckline at ES 1955/SPY 196, and then see the right shoulder break out upwards into the melt-up.  We’d want to be long for that.

In any case, all will become clear.

IBB Price Channel Breakout and Top or Consolidation

IBB has Broken Out of its Price Channeled Move Off the 10/15 Low

IBB has Broken Out of its Price Channeled Move Off the 10/15 Low

IBB has broken out of its price channeled move since the October 15 low and is forming a megaphone or head and shoulders or other topping or consolidation pattern here.

A downward breakout from a complete pattern wouuld be a set-up to short for a big move down.

I’ll post targets when the set-up completes.

AAPL Price Channels are Heading into Top or Consolidation

AAPL's Price Channels have Reached the Point Where They Must Start a Topping or Consolidation Pattern

AAPL’s Price Channels have Reached the Point Where They Must Start a Topping or Consolidation Pattern

AAPL’s move up out of the October 15 low has been entirely up price channels.  Price channel forms during low volume passionless moves dominated by technical trading.  They can move a price a long way fast, but there are limits to how far they can go.

There’s an old-timer rule for counting the alternating touches on the channel sides that requires AAPL to begin forming a topping or consolidation pattern on the next wave up.

This pattern could be a head and shoulders or a megaphone similar to the green scenario drawn on the chart. But it could also be something like a very fast, small triangle inside the channel that breaks out downwards.

A breakout downwards from any topping pattern here would be a set-up to short to at least the October 15 low and probably lower.  I’ll post targets when we see the set-up.

ES Third Breakout

ES Topping Scenarios

ES Topping Scenarios

ES broke out through its third rising wedge bottom line (bright blue) overnight.

There’s an old-timer rule that says that means the up move is over.  The market is now officially in a sideways move.

However, the wave down looks like an overnight echo wave to me.  (Megaphones often put in a retrace to VWAP, then a second wave to the side of the megaphone they just came from, before a trip to the other side.  This especially happens a lot overnight.)

The echo wave got bought exactly like yesterday’s post-FOMC dip, so I’m still expecting one last new high (green scenario).

But the next breakout downward from the bright blue rising wedge is a set-up to short.

Legal for Real Downward Breakout, But Could Still Put In One More High

ES's Final Topping Megaphone is Legal for Downward Breakout, But Will Likely Make One More High

ES’s Final Topping Megaphone is Legal for Downward Breakout, But Will Likely Make One More High

ES is forming a small megaphone at the VWAP of yesterday’s and today’s little topping megaphone.  If it reverses here, it’s legal for a downward breakout that could take the price to the 1750 area, and possibly further than that after a sharp retrace.

But in these super-extended up moves, you usually see the market squeeze out every last inch.  That’s why I wouldn’t be surprised to see one more high here (pink scenario), with a small breakout and a topping formation on the top of the purple megaphone and blue rising wedge that’s been unfolding for days.

If we are lucky enough to get that higher high, short on the downward breakout from the little topping formation at the megaphone and wedge top.

Second Breakout Post-FOMC

Second Breakout, Likely to Be a Fake but May Not Be

Second Breakout, Likely to Be a Fake but May Not Be

The price has already reentered the wedge, making the second breakout more likely to be fake, as expected.

But if the price breaks out past this low before a new high, the breakout is probably real.

Note the 4th and likely final topping megaphone within the other topping megaphones.

First Breakout Post-FOMC

After the FOMC Announcement, ES has Broken Out of its First Rising Wedge

After the FOMC Announcement, ES has Broken Out of its First Rising Wedge

ES has broken out of its first rising wedge (bright blue on chart). But that wedge bottom got redrawn with the fake breakout a few days ago.

ES would usually make a fake breakout through that second line, then put in one more new high for this move.

Assuming we see the fake breakout, redraw the bottom line of the wedge one more time, and the breakout through that third line should stick.

Other scenarios are possible, like a straight move down with no higher high (purple on chart). Or no fake breakout before the higher high.  The ones on the chart are just the most likely.

I’ll update as needed.