Bad Triangle Breakout

ES Broke Out Downwards from its Gray Triangle but with a Tell that There's More to Come

ES Broke Out Downwards from its Silver Triangle but with a Tell that There’s More to Come

ES broke out downwards from its silver triangle, but the breakout came after an exact touch on the triangle top.

Breakouts after exact tags of important lines usually don’t last.  They suggest the move’s been controlled by technical traders, and moves controlled by technical traders usually get run over.

I’ve redrawn the ES rising megaphone set-up on the 60-minute chart as a rising megaphone (orange) inside a likely larger rising megaphone (blue) to reflect that ES is likely to go higher before a correction to 2150 (green scenario).

Neely Set-Up for a Big Move Down

ES continues to form its triangle (see yesterday’s post).

Neely sent out an email to non-subscribers saying that he’s expecting the top that’s forming now to lead to a big downwards trending move that starts in February or March.  I won’t post his charts but his set-up translates into my green scenario in the chart below.

Neely is Looking for a Big Move Down Coparable to the Green Scenario

Neely is Looking for a Big Move Down Comparable to the Green Scenario

I’ve simplified the green scenario for clarity, but it would almost certainly put in a bounce off the neckline at roughly 1800 for a right shoulder on the potential head and shoulders top.  The right shoulder would likely retest the bottom of the blue rising megaphone.

The green scenario is a classic megaphone right shoulder on the H&S that formed between September 2014  and roughly August 2015.  Usually with a megaphone right shoulder you’d see a new high for the head on a larger H&S that will actually complete and break out downwards.

The purple scenario represents one last rising megaphone forming off the 2011 high and low.  That rising megaphone is not required.

Note that Neely sees ES reaching almost 2400 before the big correction begins.  That would likely mean a new high after a dip to roughly 2150 to complete the top of the top.

I’m starting my holiday today but I’ll be checking charts daily and will post next week if something important happens in ES/SPY, oil, gold, or the dollar.  Otherwise I’ll see you January 3.

ES Triangle

ES Triangle

ES Triangle

ES appears to be forming a triangle in the right shoulder spot of a head and shoulders top for the orange rising megaphone. ES is now back inside the rising megaphone.

Usually this triangle would break out downwards after completion to put a top on the move out of the November 11 low. It could also be a top on the move out of the election night low.

If the triangle should break out upwards instead in the light holiday trading, ES will be moving into the start of a top.

DX Update

DX is Working on a H&S Top for its Blue Rising Megaphone Before a Likely Pullback to the Bottom of the Red Megaphone

DX is Working on a H&S Top for its Blue Rising Megaphone Before a Likely Pullback to the Bottom of the Red Megaphone

DX broke through the top of a flat-topped megaphone back in mid-November, and then hung around without really taking off.  That usually means it’s turning the flat-topped megaphone into a conventional megaphone (orange on chart).

DX also needs to retrace to the bottom of its blue rising megaphone.

DX could be completing the top before the dip right now, or it could work its way higher in another leg up for a taller head on a H&S top for the head of a larger H&S for the blue rising megaphone.

Euro futures have confirmed a falling wedge bottom.

Euro Futures Falling Wedge Bottom

Euro Futures Falling Wedge Bottom