ES Potential Routes to March Low Critical Decision Point

ES Potential Megaphone to March Low (Green Scenario) vs Direct Route (Orange Scenario)

ES Potential Megaphone to March Low (Green Scenario) vs Direct Route (Orange Scenario)

ES has been filling the Sunday night gap down to its 200 dma overnight.

It can start forming a top on that retrace here to continue down to the March low critical decision point (orange scenario), or it can set up a pop to the 2085-2090 area to confirm a megaphone down to the March low (green scenario).

ES Closing in on Critical Decision Point on Greek News

ES Critical Decision Point Should Be Just Below the March Low

ES Critical Decision Point Should Be Just Below the March Low

Greece has voted against austerity and the market is down hard Sunday night.

The ES minimum target for the move off the high is just below the March low.  That is also a critical decision point.

ES could bounce hard from there into a right shoulder to complete the potential H&S on the daily chart.  The right shoulder could also fail and put ES into an upwards breakout from the potential H&S with a target of roughly 2200.

Or ES could keep going through the critical decision point with a target of roughly 1900 at the bottom of a long-term rising megaphone top.  If ES gets to the bottom of that formation, it would usually bounce off it but the top is likely in before a much larger correction.

Or ES could start a megaphone here to get the price just a bit through the March low and likely just a bit through the all-time high before heading further down.

So both targets and the price action en route to the targets are important here.

Potential Mini Sornette Bubble Set-Up

Potential Mini Melt-Up Set-Up (Green Scenario)

Potential Mini Melt-Up Set-Up (Green Scenario)

There’s a potential mini Sornette melt-up on the ES 2-minute chart (green scenario).

The set-up could morph into a head and shoulders (purple scenario) or it could fail at the double bobble breakout past the head.

If it fails, ES could still form a triangle here, or it could plunge straight to the March low critical decision point.

ES Killed Price Channel

ES Killed its Potential Price Channel (Pink) Yesterday, Meaning Its Likely Already Working on the Top for this Retrace

ES Killed its Potential Price Channel (Pink) Yesterday – That Means It’s Likely Already Working on the Top for this Retrace

ES killed its potential price channel melt-up set-up yesterday. That means it’s likely already working on a top for this retrace of the move off the June 22 high.

That doesn’t mean the price won’t go higher. For example, ES could be working on a head and shoulders that could take the price to 2092 or even the 2100-2104 area, especially into a holiday weekend with events in Greece likely to be important.

It’s also still possible for ES to set up a new melt-up price channel.  It would look something like the blue scenario in the chart below.

Potential Price Channel Melt-Up Set-Up

Potential Price Channel Melt-Up Set-Up

The blue scenario could take the price to a new all-time high, but it wouldn’t be much of a new all-time high because it would occur within a megaphone with mandatory retrace requirements below.

ES is still a favorite to retrace to the March low before any sustainable move up to a major new high.

I’ll post the set-up to get short or any new set-ups to get long when they happen.

ES Triangle vs Megaphone vs Price Channel Set-Ups

ES is Likely Forming Either a Triangle (Red) or a Bottoming Megaphone (Blue) within a Larger Megaphone (Blue)

ES is Likely Forming Either a Triangle (Red) or a Bottoming Megaphone (Blue) within a Larger Megaphone (Blue)

Last night it looked like ES was forming a triangle. Then there was new Greek news, and now ES could be forming a larger triangle (red on chart).

But there is also a potential megaphone within a megaphone on the chart.  That could take the price both a lot lower and a lot higher.

Or, on a retrace of its overnight surge, ES could set up a new price channel (pink in chart below).  The price channel would be heading into its critical decision wave, in which it either starts a topping pattern (purple scenario in chart below) or sets up a breakout into a series of melt-up channels.

Potential Price Channel Set-Ups

Potential Price Channel Set-Ups

The most likely scenario is either the purple scenario within the potential price channel or the purple megaphone scenario in the top chart.  ES still has a strong target below at the March low based on the failed breakout from the ascending triangle it began forming with the March low.

But if we get the green price channel melt-up set-up, you definitely want to bet it.  The breakout through 2090 and the price channel top would suggest a trip to a new all-time high, though not much higher than the current high.

SPY Put-Call Ratio – Both Bulls and Bears Dig In

The SPY Put-Call Ratio Dropped to Roughly Neutral Today on a Strong Rise in Open Interest

The SPY Put-Call Ratio Dropped to Roughly Neutral Today on a Strong Rise in Open Interest

SPY put and call volume both dropped today, though SPY put volume dropped a lot more–enough to bring the SPY put-call ratio back down from its upper Bollinger Band to its 20 dma.

The drop in the ratio happened on a strong rise in open interest. That means both bulls and bears were digging in today. These are perfect conditions for a triangle or similar consolidation.

ES Megaphones in Megaphones Usually Mean a Triangle

ES is Forming Megaphones (Purple) Inside Megaphones (Orange) - That Usually Means a Triangle is Forming (Red)

ES is Forming a Megaphone (Purple) Inside a Megaphone (Orange) – That Usually Means a Triangle is Forming (Red)

ES killed a potential melt-up today and instead began forming megaphones inside megaphones.  Usually a series of interior megaphones across the VWAP of larger megaphones mean that a triangle is forming.

Any triangle can be a bottoming pattern, but a triangle in this spot would usually serve as a continuation pattern for the ES move down to the critical decision point at the March low.