Still Working on that Breakout

Sornette vs Megaphone vs Rising Megaphone Breakout Set-Ups

Sornette vs Megaphone vs Rising Megaphone Breakout Set-Ups

ES is still working on a set-up for a genuine breakout through the blue megaphone VWAP at roughly 2362.

The green scenario represents a Sornette melt-up breakout set-up.

The purple scenario represents a right shoulder megaphone on the inverse H&S on the chart.

The orange scenario represents a rising megaphone breakout set-up that will confirm if ES can put a new high in the potential red rising megaphone before a breakout through its bottom.

If ES breaks out downwards from the right shoulder megaphone in the purple scenario, it could be setting up a continuation pattern for a correction to 2150 before a new all-time high (not drawn on chart).  That is the least likely scenario at the moment.

Still at Inverse H&S Neckline

ES is Back at its Inverse H&S Neckline (Red) Trying to Break Out to the Blue Megaphone Top

ES is Back at its Inverse H&S Neckline (Red) Trying to Break Out to the Blue Megaphone Top

ES is still trying to break out of its inverse head and shoulders neckline (red) and blue megaphone VWAP at roughly 2362.

There’s a good chance of a megaphone right shoulder forming here (purple scenario) because ES got up here from the low in a little rising megaphone.

Back at VWAP and Looking for a Way to New Highs

False Breaks Usually Mean an Extension

ES is Back Outside of its Navy Blue Megaphone Top Trying to Extend the Orange Rising Megaphone

ES is Back Outside of its Navy Blue Megaphone Top Trying to Extend the Orange Rising Megaphone

ES is back outside of its navy blue megaphone top and back inside its orange rising megaphone bottom after false breaks through both.  That would usually mean ES wants to extend the orange rising megaphone and put a bigger top on the navy blue megaphone.

A new high would confirm that the orange rising megaphone is an interior rising megaphone within the gray rising megaphone.

The green scenario on the chart above is more likely than the purple scenario.  The green scenario could take the price a lot higher than drawn.  The purple scenario is one of several possible ways ES could twine across the navy blue megaphone top for an extended time.

I’ve seen prices twine up a major megaphone top for months.

But the Extension hasn’t Triggered Yet

ES is Back at its Blue Megaphone VWAP & Looking for a Way to Break Through

ES is Back at its Blue Megaphone VWAP & Looking for a Way to Break Through

But ES has not yet broken through its blue megaphone VWAP at 2362 on the 60-minute chart, so technically it’s not yet set up for a move to a new all-time high or a twining move.  We could see a small pullback from VWAP to put a right shoulder on an inverse H&S (green scenario).  Or we could see a move down to retest the low and put a double bottom on an inverse H&S (orange scenario).

Or we could see ES put in a Sornette melt-up set-up at the blue megaphone VWAP (pink scenario).  We could even see a failure to break out through 2362 and collapse (not drawn, because it’s unlikely).

Assuming ES breaks out upwards through 2362 one way or another, the minimum target is the blue megaphone top and the play is to stay long until ES breaks out of the new gray rising megaphone.  The gray rising megaphone bottom doesn’t get officially drawn until ES hits a new all-time high.

A Market that’s Rethinking its Prospects

The market is essentially telling us it doesn’t know what to do.  It had set up a major top for a big correction, and now it is glimpsing the potential of bullish prospects.

It should still retrace to 2150 at some point even if it’s destined to cancel out its major bearish set-ups and head up in a multi-year bull market.

Retesting Megaphone Top

ES is Retesting the Top of its Big Navy Blue Megaphone from Inside

ES is Retesting the Top of its Big Navy Blue Megaphone from Inside

ES is retesting the top of its big navy blue megaphone from inside. As long as ES stays inside the navy blue megaphone top, the short set-up is intact.

ES is Megaphoning Across the Top of its Red Falling Megaphone on the 60-Minute Chart

ES is Megaphoning Across the Top of its Red Falling Megaphone on the 60-Minute Chart

On the 60-minute chart, ES is megaphoning across the top of the red falling megaphone it confirmed Sunday night.  ES did not complete a proper inverse H&S inside the red falling megaphone before piercing its top.

That megaphone could break out upwards (pink scenario), taking ES back out of its big navy blue megaphone and extending the orange rising megaphone on the daily chart.

Or the megaphone could form a series of megaphones inside megaphones to form a continuation pattern here before another big drop (purple scenario).

Or the megaphone could quickly break out downwards to continue the drop within a slightly modified red falling megaphone (green scenario).

Or ES could form a megaphone just underneath the navy blue megaphone top before breaking out upwards to take ES to a new all-time high (orange scenario).

Because ES did not form a proper inverse H&S bottom inside the red falling megaphone, the green and purple scenarios are most likely.

If ES gets going downwards again, there’s a good chance a price channel will set up to break it out through 2300 into a melt-down to at least 2150.  That kind of melt-down set-up would be a perfect entry into the trade if you aren’t short already.