ES is trying to decide whether it’s about to complete a complex head and shoulders (red neckline on chart) or whether it’s putting a megaphone right shoulder on that head and shoulders for a move to a new high (purple scenario, which includes a typical false top at the level of the previous high).
It needs at least a modest swing up in either case (green scenario). It’s been putting that in after hours.
Because of the 3-year price channel and late-day interior megaphone, the purple scenario is the favorite. If there were no 3-year price channel on the ES chart, and ES hadn’t formed that neckline megaphone, it would be about a coin flip.
I am outright hoping for the purple scenario, because the green scenario would be a pain in the neck. That’s because the green scenario would leave a lot of unanswered questions on the chart. For example, we could not short with confidence in a target at the 3-year price channel bottom. Instead, after the dip shown on the chart, ES could still go on to a new high and the 3-year price channel top.
The green scenario would force us into a lot of short-term trades on zigzags.
The SPY put-call ratio should tell us a lot when it’s available a few hours after the close.