ES Needs to Go Further Down to Truly Escape This Area

ES Needs to Retrace to the Red Megaphone VWAP to Redraw the Red Megaphone Top for an Escape Upwards

ES Needs to Retrace to the Red Megaphone VWAP to Redraw the Red Megaphone Top for an Escape Upwards

ES has broken out of last night’s price channel but its overnight rally doesn’t look very robust.  Although a breakout past Friday’s high to try for a Sornette melt-up set-up (pink scenario) is possible, it’s more likely that ES will merely retest the orange megaphone top from inside before heading further down.

If ES can make it all the way down to the big red megaphone VWAP at roughly 1885, the red megaphone top should be redrawn to connect the February 1 and February 26 highs.  That means a retrace to 1885 and reversal there would free ES for a genuine upwards breakout from the consolidation ES has been in since mid-January (green scenario).  The minimum target would be 2100, but ES would have goods odds of breaking out past the high into a blow-off top.

If ES reverses at the orange megaphone VWAP, and breaks out past Friday’s high, it will have just put in a megaphone 5th wave false top.  That would likely mean a melt-up to roughly 2100 and then a retrace to 1885 or even the red megaphone bottom (purple scenario).

ES could also head down to the orange megaphone bottom, reverse to its VWAP, and then break out downwards from the orange megaphone to the red megaphone bottom (blue scenario).

ES Confirms a Price Channel Sunday Night

ES Confirmed a Price Channel Sunday Night and It's Now in its Critical Decision Wave

ES Confirmed a Price Channel Sunday Night and It’s Now in its Critical Decision Wave

ES confirmed a price channel (red on chart) Sunday night and the channel is now in its critical decision wave. That’s where the channel either starts a sideways move (a bottoming or continuation pattern, depending on the breakout) or breaks out downwards into a melt-down.

See today’s early post for the implications of breakout direction from a sideways move at this level.

Down Short-Term, Up Long-Term and Vice Versa

ES has a Runaway Bullish Set-Up (Pink Scenario) but Usually a More Bearish Short-Term would Mean a More Bullish Long-Term and Vice Versa

ES has a Runaway Bullish Set-Up (Pink Scenario) but Usually a More Bearish Short-Term would Mean a More Bullish Long-Term and Vice Versa

ES has a big potential Sornette melt-up set-up on the chart (pink scenario) with a target of 2100, but usually it wouldn’t trigger in this spot.

Instead, usually the orange megaphone would complete as a conventional megaphone, which means short-term bearishness would usually be more bullish here longer-term than short-term bullishness would be.

A fast reversal Sunday night to a new high would usually mean a big H&S top is forming across the orange megaphone top before a breakout downwards from the megaphone with a minimum target of 1805 and a potential target of 1660 (blue scenario).

The blue scenario would likely mean a tag of 2000 before a big reversal.