ES Short-Term Retrace Targets

Falling Megaphone

ES is Likely to See 2170 Again One Way or Another

ES reached its mandatory retrace target for the orange rising megaphone on the 5-minute chart yesterday.

It formed the red falling megaphone in the course of that retrace and if it can make a lower low straight from here it will have confirmed the blue falling megaphone.  Either way, ES is likely to see 2170 again.

ES is still dealing with a flat-topped megaphone within a symmetrical megaphone on the 60-minute chart.  Here’s the chart from yesterday:

ES is Still Trying to Break Out Through 2184 but Could Set Up a Crash at Any Time

ES is Still Trying to Break Out Through 2184 but Could Set Up a Crash at Any Time

The purple scenario would trigger a melt-up set-up on the daily chart.  The target depends on exactly what happens before the breakout to a new all-time high.

Double Bobble Upwards Breakout as a Rising Wedge (Pink Scenario), Price Channel (Green Scenario) or Rising Megaphone (Purple Scenario)

Double Bobble Upwards Breakout as a Rising Wedge (Pink Scenario), Price Channel (Green Scenario) or Rising Megaphone (Purple Scenario)

A Wide Open Market

ES is Still Trying to Break Out Through 2184 but Could Set Up a Crash at Any Time

ES is Still Trying to Break Out Through 2184 but Could Set Up a Crash at Any Time

ES has both a megaphone and potential flat-topped megaphone on the chart (both silver).

It’s formed a falling megaphone (orange) off Thursday’s high and needs a lower low to complete it, but the falling megaphone virtually guarantees at least a deep retrace of the drop from Thursday’s high.

ES could complete a head and shoulders across 2150 to set up a breakout downwards from the silver megaphone.  Or it could megaphone back to 2184 before a trip to the silver megaphone bottom and another run at 2184 (purple scenario).  In that case, the run at 2184 could fail after the tiniest bounce and the flat-topped megaphone could break out downwards (pink scenario).

If ES manages a breakout through 2184 it could go into a blow-off top move worth hundreds of points, or it could form a top at the silver megaphone top before a breakout downwards from this consolidation.  However, a breakout through 2184 would be a breakout from a melt-up set-up on the daily chart, so the purple scenario would be more likely.

Double Bobble Upwards Breakout as a Rising Wedge (Pink Scenario), Price Channel (Green Scenario) or Rising Megaphone (Purple Scenario)

Double Bobble Upwards Breakout as a Rising Wedge (Pink Scenario), Price Channel (Green Scenario) or Rising Megaphone (Purple Scenario)

If ES breaks out through 2184, we’ll have a much stronger idea of a target after we see what has happened before the breakout.

ES Top vs Another Flat-Topped Megaphone

Right Shoulder on H&S (Purple Scenario) vs Flat-Topped Megaphone (Green Scenario)

Right Shoulder on H&S (Purple Scenario) vs Flat-Topped Megaphone (Green & Orange Scenarios)

ES could plunge this morning back to 2152ish, put in a small bounce for a right shoulder on a head and shoulders across the red megaphone VWAP, and then go crashing down out of the megaphone all the way to 1800.

But if ES heads up from here at the open and takes out yesterday’s high, it will be confirming another rising megaphone (pink) and setting up another flat-topped megaphone (blue on chart).  In that case, it will likely drop to about 2080 before trying again for a breakout through 2184 on the December contract.

The green scenario would be a breakout from a double bobble at the top of a potential H&S on the daily and weekly charts.  That means it would be a strong set-up for a melt-up.

Double Bobble Upwards Breakout as a Rising Wedge (Pink Scenario), Price Channel (Green Scenario) or Rising Megaphone (Purple Scenario)

Double Bobble Upwards Breakout as a Rising Wedge (Pink Scenario), Price Channel (Green Scenario) or Rising Megaphone (Purple Scenario)

The melt-up target and characteristics would depend on whether the breakout to a new high put a rising wedge, price channel, or rising megaphone on the chart.

ES Megaphone

ES is Either Forming a Topping Pattern at the Red Megaphone VWAP or Going for Its Top - If It Goes for the Top, It Triggers a Melt-Up Set-Up on the Daily Chart

ES is Either Forming a Topping Pattern at the Red Megaphone VWAP or Going for Its Top – If It Goes for the Top, It Triggers a Melt-Up Set-Up on the Daily Chart

ES broke out of its flat-topped triangle yesterday and is either forming a topping pattern at the red megaphone VWAP or going for the megaphone top.

A trip to the megaphone top would mean a new all-time high.  That would put a rising wedge on the chart (pink scenario below).

Double Bobble Upwards Breakout as a Rising Wedge (Pink Scenario), Price Channel (Green Scenario) or Rising Megaphone (Purple Scenario)

Double Bobble Upwards Breakout as a Rising Wedge (Pink Scenario), Price Channel (Green Scenario) or Rising Megaphone (Purple Scenario)

The rising wedge scenario has the least upside potential unless we get a genuine breakout through the rising wedge top.  More likely we’d see a small pierce of the rising wedge top before a breakout through its bottom.

Remember that Double Bobble

Double Bobble Upwards Breakout as a Rising Wedge (Pink Scenario), Price Channel (Green Scenario) or Rising Megaphone (Purple Scenario)

Double Bobble Upwards Breakout as a Rising Wedge (Pink Scenario), Price Channel (Green Scenario) or Rising Megaphone (Purple Scenario)

ES is forming a double bobble as it tries to break out upwards from the big head and shoulders on the daily and weekly charts.

An upwards breakout from the second bobble–meaning past the existing all-time high–is a set-up for a melt-up.  That set-up would be killed if ES takes out the low of the first bobble.  (After breakout, the set-up would be killed if ES takes out the low of the second bobble.)

If the double bobble is going to break out upwards, it makes a difference what form it takes before that breakout.  A rising wedge (pink scenario) is the most limiting set-up with the smallest potential move unless the rising wedge breaks out upwards.

Here’s an example of a double bobble rising wedge set-up that broke out upwards:

Double Bobble Rising Wedge Upwards Breakout

Double Bobble Rising Wedge Upwards Breakout

A double bobble price channel (red on top chart, green scenario) would provide the best opportunity for the biggest, fastest move up.  An upwards breakout from a price channel would be a set-up for a blow-off top.

A rising megaphone set-up (purple scenario) would typically lead into a bigger move than a rising wedge set-up but a smaller move than a price channel set-up.  But it could lead into only a very small move up or a prolonged move up that keeps extending in between sharp retraces.

QQQ Long-Term Scenarios

QQQ is Working on a H&S Top on its Red Rising Megaphone and a Larger H&S Top for its Blue Rising Megaphone

QQQ is Working on H&S Tops for Both its Red and Blue Rising Megaphones

On a super long-term chart you can see that QQQ began a megaphone (navy blue in chart) back in 2006. It is now completing the melt-up 5th wave of that megaphone before a trip back to its VWAP at roughly 42.

The move up out of the 2008/2009 lows has formed a rising megaphone (red) inside a rising megaphone (bright blue).  Each rising megaphone needs to complete with a H&S or megaphone top of its own.

The green scenario is the fastest way I can see at the moment for QQQ to complete a simple H&S top for both rising megaphones and break out back down to the navy megaphone VWAP.

The purple scenario is another slower way the tops could play out.