Rising Megaphone Set-Up on ES

ES Pierced the Bottom of the Orange Rising Megaphone and Then Headed Up into a Potential Right Shoulder or New Megaphone High

ES Pierced the Bottom of the Orange Rising Megaphone and Then Headed Up into a Potential Right Shoulder or New Megaphone High

ES fell to the bottom of a rising megaphone (orange) on its shorter-term charts and pierced the line a bit. Then it reentered the formation, heading back to at least the purple megaphone VWAP at roughly 2080.

A reversal at 2080 puts a H&S top on the orange rising megaphone. A breakout downwards from the rising megaphone and H&S would target 2010. Then we’d see if ES can put in a simple right shoulder to complete a larger H&S.

If ES reverses at 2080 but starts a megaphone on the breakout from the orange rising megaphone, it will likely megaphone its way to both a squeaker new high and 2010.

ES could also make it through 2080 to melt up to the purple megaphone top and put a new head on a larger potential H&S.

Mini Sornette Melt-Up Set-Ups

Potential Sornette Melt-Up Set-Ups (Purple One More Likely)

Potential Sornette Melt-Up Set-Ups (Purple One More Likely)

Here are some potential Sornette melt-up set-ups on the 2-minute chart.

The purple one is more likely.

When they fail, it’s usually in the 2nd bobble in the course of trying to break out upwards.

If it succeeds, minimum target is 2080.

The green/pink scenario set-up is likely too small to get all the way to 2080, would require a Part 3 (pink) after pullback.

ES Mini Price Channel

es-mini-channel-4-29

ES Formed the Blue Price Channel on Today’s Drop – If the Price Regains the Channel Top, it’s Forming a Consolidation, Likely a Bottom

ES formed a price channel (blue) on today’s drop. The channel is bouncing off its critical decision wave. If it reaches the channel top, the price is consolidating–likely forming a bottom.

DX is in the Critical Decision Wave of a Price Channel

The Dollar is in the Critical Decision Wave of a Price Channel (Blue) - Melt-Down Set-Up vs. Bottom

The Dollar is in the Critical Decision Wave of a Price Channel (Blue) – Melt-Down Set-Up vs. Bottom

The Dollar Index (DX) is in the critical decision wave of a price channel (blue). This is where the DX either sets up a breakout into a melt-down channel or starts a bottom.

As recently as a year ago, a melt-down would usually start with a small pierce of the channel bottom, followed by a partial pullback into the channel, and then the breakout into the melt-down.

But the bots seem to know this set-up now, so they usually put in a fake breakout after the initial channel pierce even if a bottom is starting, so you have to play a breakout a little slowly.  In particular, watch out for a bottoming megaphone here that takes out the August 2015 low but then heads up to the channel top.

That kind of bottom would suggest a strong move up is coming, usually to the top of the recent range but at least to 95-96.

The Red and Blue Megaphones on the DX Chart would Usually Mean a Retrace to 95-96 Before a Genuine Breakout Downwards

The Red and Blue Megaphones on the DX Chart would Usually Mean a Retrace to 95-96 Before a Genuine Breakout Downwards

DX has formed a megaphone inside a megaphone within its recent range. That would usually mean a retrace to at least 95-96 before a genuine breakout downwards.

Oil at Price Channel Top and Critical Decision Point

Oil is at its Silver Price Channel Top - Critical Decision Point for Breakout into Melt-Up Channel vs Topping

Oil is at its Silver Price Channel Top – Critical Decision Point for Breakout into Melt-Up Channel vs Topping

Oil has made it to its silver price channel top. Normally this would be a slam-dunk short, global oversupply being what it is, but apparently China’s moved into commodity speculation and spawned a nice bubble, and who knows how long the madmen there can keep the move vertical?

There are two ways a breakout into a melt-down could happen.  Either oil could just take off through its silver channel top to the top of the blue roll-up channel, or oil could pierce the silver channel top a little, pull back to roughly the blue channel bottom, and then take off for as high as 100.

The more likely scenario in normal times would be the purple or blue one, in which oil retraces to its silver channel bottom from here to confirm that it’s topping for now.

ES Megaphones

ES is Likely Forming a Bottoming Megaphone within the Red Megaphone to Get to the Orange Megaphone VWAP

ES is Likely Forming a Bottoming Megaphone within the Red Megaphone to Get to the Orange Megaphone VWAP

I just posted a potential crash set-up for QQQ and NQ, but I have to tell you, if that price channel were going to break out into a melt-down channel it would usually already have done it.

Also, I find it hard to believe that ES, having returned home to its beloved 2080, where it spent March-August 20, 2015, will leave it this soon, especially after only a tag on the top of its orange megaphone.  If ES were going to head to the orange megaphone bottom, it would usually have broken out through the orange megaphone top to draw an H&S on top of it before heading down.

Most likely both QQQ and ES are megaphoning their way back to larger megaphone VWAPs (orange megaphone in chart above).  But if you have to megaphone your way back to an obvious retrace point, it’s usually not bearish.

The green scenario or blue scenario are most likely.  The purple scenario is possible.  If we actually get the purple scenario, buy any bottoming pattern at the bottom of the orange megaphone, because the next wave up will be to its top and it will be a melt-up.

QQQ Price Channel and Island Top

The Clearest Set-Up on the Charts This Morning is the Price Channel (Navy) on QQQ, in its Critical Decision Wave

The Clearest Set-Up on the Charts This Morning is the Price Channel (Navy) on QQQ, in its Critical Decision Wave

QQQ and NQ have confirmed a price channel (navy blue) on their charts after putting in an island top.

The price channel is in its critical decision wave between starting a bottom (purple scenario) and breaking out downwards into a melt-down channel (green scenario).

A melt-down could stop at the orange megaphone VWAP or it could go all the way for the megaphone bottom.

Stuck Again at ES 2080

ES has Now Broken Out of and Retested Two Trend Lines (Silver) and Appears to Be Breaking Out of the Third (Red)

ES has Now Broken Out of and Retested Two Trend Lines (Silver) and Appears to Be Breaking Out of the Third (Red)

From early March 2015 through August 20, ES put in a prolonged sideways move across 2080.  The move was a series of megaphones inside megaphones that ultimately formed a shallow head and shoulders with a triangle right shoulder that broke out downwards into the crash into the August 24 low.

Now ES appears to be starting another prolonged sideways move across 2080.  There’s an old-timers rule that says once a price has broken and retested two trend lines (silver in chart above), the break of the next trend line means a sideways move has started.  ES is stuck in a megaphone across 2080 that has clearly broken the third trend line (red in chart above).

A sideways move doesn’t mean that ES won’t reach a new all-time high.  It just means that before ES puts in a genuine breakout from this area, we’ll likely see something like a triangle or H&S or big megaphone or rising wedge form and complete.  Whatever type of formation completes, it can break out in either direction.

ES is Forming a Series of Megaphones Inside Megaphones on its Short-Term Charts

ES is Forming a Series of Megaphones Inside Megaphones on its Short-Term Charts

ES has already started forming a series of megaphones inside megaphones across 2080, and these are occurring within larger megaphones (orange, purple, and pink on the chart). Typically a series of megaphones inside megaphones will form a triangle. We could also see a triangle form within a H&S or larger triangle or bigger megaphone.

The main thing to remember is that most breakouts right now will be fake-outs, until we get a clear set-up in one direction or the other. I just got flat. This consolidation could last a week or it could last through the end of the year and beyond.