ES Price Channel Says This Dip Will Be Small (Updated)

Today's ES Move Down Formed a Price Channel, Which Means Move Will Be Small

Today’s ES Move Down Formed a Small Price Channel, Which Means Move Will Be Small

Today’s ES move down has formed a small price channel (blue on chart), which means the dip will be small.

It could be bottoming now, across roughly VWAP of the bright blue megaphone on the chart. Or it could still go all the way for the bright blue megaphone bottom (it’s deciding as I type this).

Either way, the next target is the bright blue megaphone top.

If the price should get all the way to the blue megaphone bottom, there’s about a 30% chance that the price will retrace only to the blue megaphone VWAP and reverse there into a dip with a target of the 3-year price channel bottom at SPY 190ish.  And I wouldn’t be surprised to see a smallish breakout through that channel bottom.

Update:  Here is the price channel and roll-over channel as the action dies down after the close.

New Year's Eve Price Channel on ES

New Year’s Eve Price Channel on ES

ES got hung up at the end of the day at the bottom of the rolldown price channel, and looks like it will continue to the bright blue megaphone bottom in the course of forming a bottom for today’s dip.

Then it’s up to at least the bright blue megaphone VWAP at roughly ES 2065, and probably back to the bright blue megaphone top somewhere over 2100.  The next top should lead to a pretty serious correction, but still not yet The Big One.

ES New Year’s Eve Megaphones

ES Megaphones Started Forming December 18

ES Megaphones Started Forming December 18

There are some short-term megaphones on the ES chart that merit watching heading into the new year.

The orange interior megaphone is legal for a downward breakout to the blue megaphone bottom.  But it might be forming an interior megaphone right now (purple scenario) for a surge to another new high that could be the final new high before the next dip.

The next dip is a favorite to make it to the bottom of the ES/SPY 3-year price channel at roughly SPY 190.  But we could also see a dip that bottoms at roughly ES 2030 and goes on to another new high before the bigger dip (similar to the green scenario above).  That would simply be ES and SPY putting a larger top on the daily chart before the bigger dip.

The more dragged-out complicated scenarios are more likely than a plunge straight from here.  Tops that start developing during light holiday trading are based on little-guy selling.  It’s too easy for big money to run over little guys for such a top to be likely to hold.

 

Yen, Gold and 10-Year Set-Ups, Implications for ES and SPY

The Yen's Jump Today is a Retest of VWAP of  Megaphone within a Megaphone

The Yen’s Jump Today is a Retest of VWAP of Megaphone within a Megaphone

The yen’s jump today is a retest of the VWAP of a megaphone within a megaphone. The yen may retest the bottom of its purple rising megaphone before continuing down to the bottom of its blue megaphone.

So this move doesn’t interest me unless the yen keeps going up, reentering the purple rising megaphone. Then it would be a set-up to go long the yen (and likely short the market) with a target of the yen’s blue megaphone top.  I don’t expect that to happen.

Gold is Thrashing Around in the Middle of a Likely Triangle (Navy Blue)

Gold is Thrashing Around in the Middle of a Likely Triangle (Navy Blue)

Gold is thrashing around across VWAP of a megaphone inside a likely triangle (navy blue on chart). This is a miserable place to enter a trade in either direction.

The 10-Year is Putting in a Megaphone Right Shoulder on its Potential H&S that Should Retest the October 15 High

The 10-Year is Putting in a Megaphone Right Shoulder on its Potential H&S – Should Eventually Retest the October 15 High

The 10-year appears to be forming a megaphone right shoulder on its potential head and shoulders. This move up may go a little higher, but then the 10-year should head down into a fake H&S neckline breakout.

After that, things get interesting. The 10-year should head up to take out the head of its potential head and shoulders, retesting the October 15 high. You can go long for this move on the reentry through the H&S neckline after the fake breakout.

That move suggests some trouble coming for ES and SPY, but not yet.

And that will put a potential large triangle on the 10-year chart.

SPY is Working its Way to Top of 3-Year Price Channel

SPY is Working its Way Back Up to the Top of its 3-Year Price Channel

SPY is Working its Way Back Up to the Top of its 3-Year Price Channel (Bright Blue)

SPY is working its way back up to the top of its 3-year price channel (bright blue on chart).  The move from here should be pretty straight up.

Usually in a spot like this bears would try another attack early in the new year.  Typically on that correction the price would make it to the bottom of the channel.

Close-Up - Bright Blue Line is Channel Top

Close-Up – Bright Blue Line is Channel Top

Gold Triangle Set-Ups

Potential Gold Triangle (Navy Blue)

Potential Gold Triangle (Navy Blue)

Gold should have turned up by now to retest the top of its potential navy blue triangle.

That move would probably coincide with ES moving to retest its latest megaphone VWAP, which ES looks about ready to do.  If it happens, you could go long on a breakout through the bright blue megaphone VWAP (bright blue horizontal line) with a target of the navy blue triangle top.

But holiday light trading may violate the norms, in which case the bottom of the potential navy blue triangle becomes very important for gold.

If gold breaks out through the potential triangle bottom, the next target is the bottoms of the bright blue and orange megaphones.  After that, gold would have a mandatory retrace to at least the bright blue megaphone VWAP before it would be legal for a downward breakout.

ES Megaphone Creep

ES is Creeping Up the Underside of its Blue Megaphone Top

ES is Creeping Up the Underside of its Blue Megaphone Top

ES is creeping up the underside of its blue megaphone top. It could do this all the way to 2100, but if it continues it would usually retrace to at least the megaphone VWAP before breaking out.

That will put a potential head and shoulders on the chart, which can break out in either direction.

Natural Gas Megaphones

Natural Gas as Been Forming a Megaphone Since Early 2012 (Blue) - Has It Really Broken Out?

Natural Gas as Been Forming a Megaphone Since Early 2012 (Blue) – Has It Really Broken Out?

Natural gas has been forming a megaphone (blue on chart) since early 2012.  NG has broken out downwards from that megaphone the past couple of days.

As that megaphone formed within a larger megaphone that goes back to 2009 (gray on chart below), it suggests that natural gas is heading down to the gray megaphone bottom (the target is around the lows of the early ’90s!).

NG Longer-Term Megaphone (Gray)

NG Longer-Term Megaphone (Gray)

But NG has also formed a shorter-term megaphone (pink on chart below) that suggests it may throw a kink into the collapse.

Natural Gas Short-Term Megaphone Across Blue Megaphone Bottom

Natural Gas Short-Term Megaphone Across Blue Megaphone Bottom

The breakout downward from the blue megaphone happened in the context of the pink megaphone forming across its bottom.  Usually a downward breakout from a megaphone (pink) across the bottom of a larger megaphone (blue) would reverse pretty quickly for a move to the other side of the (pink) megaphone (purple scenario on chart).

I can’t guarantee that the price will reenter the pink megaphone, but if it does, it’s a set-up for a short-term long, and then we see.