ES End of Day Unanswered Question – Is Complex H&S Real or Fake?

ES is Trying to Decide Between a Complex Head and Shoulders and a Right Shoulder Megaphone

ES is Trying to Decide Between a Complex Head and Shoulders and a Right Shoulder Megaphone

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.

Declining Megaphone Scenario

Declining Megaphone Scenario

Declining Megaphone Scenario

If the ES overnight megaphone should break out out downwards, there would be a declining megaphone scenario on the chart.

It’s a less likely scenario than a continued move up, but not impossible.  ES needs to take out its existing H&S right shoulder high to confirm a right shoulder megaphone and kill this scenario.

Thanks to Pod for bringing up bearish possibilities.

Note that the retrace off the 2085-2087 area would be bigger than drawn but likely not be the bottom of the falling megaphone.

Euro VWAP Megaphone Key to Next Swing

Euro Futures are Forming a Megaphone Across the Purple Megaphone VWAP

Euro Futures are Forming a Megaphone (Orange)Across the Purple Megaphone VWAP

Euro futures are forming a megaphone (orange in chart) across the VWAP of a megaphone (purple in chart) that began forming in late January.

This is a small megaphone, not a high volume, high drama fight, so it’s likely the euro will break out the orange megaphone bottom to continue down to the purple megaphone bottom (green scenario). It’s also likely the euro will redraw the existing purple megaphone bottom, which is only a guideline for now. Expect the euro to try for 1.00.

But if the orange megaphone should break out upwards, expect a move past the February 3 high to convert the head and shoulders on the chart (red neckline, extended right shoulder) into a megaphone (purple scenario).

The purple scenario’s plunge from the blue megaphone top to its bottom would be interrupted near the orange megaphone low for a partial retrace (not drawn on chart).

ES Overnight

ES has Put In an After Hours and Overnight Retrace and Bottoming Megaphone (Purple) - Now Legal for Upward Breakout

ES has Put In an After Hours and Overnight Retrace and Bottoming Megaphone (Purple) – Now Legal for Upward Breakout

ES put in a small retrace and bottoming megaphone (purple on chart) after hours and overnight.

The little megaphone is now legal for an upward breakout, and the price should continue to form a megaphone right shoulder on the fake head and shoulders discussed yesterday.

And that means odds of a higher high are very high.