ES Big Picture Update

On Friday ES Tagged VWAP of its Big Megaphone (Red) Off the August 24 Low

On Friday ES Tagged VWAP of its Big Megaphone (Red) Off the August 24 Low

On Friday, ES tagged VWAP of its big megaphone off the August 24 low. All it needs to complete an inverse head and shoulders with a neckline at that VWAP is a dip into a right shoulder followed by a breakout.

A bottoming pattern at or across the VWAP of a major megaphone is a set-up for a trip to at least the megaphone top and ES can keep running up in a breakout from the megaphone if it wants to. In other words, if the inverse H&S completes and breaks out upwards, it’s a set-up for a blow-off top.

Technically, an inverse H&S at the big red megaphone VWAP is not strictly required, as ES has already formed a falling megaphone across the VWAP of the big red megaphone. That in itself is a set-up for a blow-off top.

The purple scenario on the chart represents an inverse H&S failure. I can’t recall seeing one in a spot like this, so it’s unlikely.

A Big Triangle on the SPX Daily Chart has Put In a Fake Breakout through the Bottom and is Now Heading Up for a Real Breakout Through the Top

A Big Triangle on the SPX Daily Chart has Put In a Fake Breakout through the Bottom and is Now Heading Up for a Real Breakout Through the Top

Another way of looking at the trading set-up on the daily chart is as a triangle (blue in chart above).  The January 20 low would be a classic fake breakout through the triangle bottom, which means that the market ought to next put in a real breakout through the triangle top for a trip to roughly 300 points higher.

Triangles are typically comprised of a series of megaphones inside megaphones across the triangle VWAP, which is at roughly the same level as the VWAP of the big red megaphone in the top chart.

What that means is that ES would often put in its inverse H&S right shoulder within a megaphone across this VWAP before taking off upwards.

Rising Megaphone on 2-Minute Chart

Today's Move Up is Occurring within the Red Rising Megaphone - Means Mandatory Retrace to 1878ish

Today’s Move Up is Occurring within the Red Rising Megaphone – Means Mandatory Retrace to 1878ish

Today’s move up is occurring within the red rising megaphone. That means the move would usually top with a head and shoulders formation.

After this move tops, ES must retrace to the rising megaphone bottom at roughly 1878.  That will also put in a retrace to the multi-megaphone VWAP level, freeing ES to break out upwards from all the short-term megaphones on the chart (green scenario).

ES could retrace as far as 1838, but a move to 1838 would complicate things.  More on this over the weekend.

Yen Triangle Target

Minimum Target for the Yen on a Likely Downwards Breakout from the Orange Triangle is 0.75 - Could Go to 0.70 Before Starting a Bottom

Minimum Target for the Yen on a Likely Downwards Breakout from the Orange Triangle is 0.75 – Could Go to 0.70 Before Starting a Bottom

Yen futures have completed the orange triangle with a false breakout through the top. That means a genuine breakout downwards is coming.

The minimum target is 0.75, and the yen could go all the way to 0.70 before starting a bottom.

Retest of Potential Triangle Top

ES is Retesting its Potential Triangle Top (Orange) but could Also Be Setting Up a Price Channel or Rising Megaphone to Blast Through It

ES is Retesting its Potential Triangle Top (Orange) but could Also Be Setting Up a Price Channel or Rising Megaphone to Blast Through It

The yen is back down near its overnight low after the Bank of Japan announced a new negative interest rate policy. The yen has already put in its mandatory retests above.

ES is back retesting its potential orange triangle top or smaller triangle top. It has been crisscrossing the top of a diamond continuation pattern for the past few hours.

It has a potential price channel/mini rising megaphone set-up to blast through this level, or it could turn down here back to 1883 for a decision on what comes next.  Because ES has been massing near the orange potential triangle top, it is likely to break out through it soon.

A move up would likely get turned back at around the 1933 VWAP level of the big megaphone off the August 24 low to put a right shoulder on the potential inverse H&S on the chart.  There are short-term megaphone tops there (bright blue, navy blue) that would require at least a retrace to their 1883 VWAPs and possibly to the megaphone bottoms.

If that inverse H&S completes and breaks out upwards, it’s a set-up for a blow-off top to roughly 2400.