Sornette Melt-Up Set-Up on 60-Minute Chart

Sornette Melt-Up Set-Up (Green Scenario) on ES 60-Minute Chart

Sornette Melt-Up Set-Up (Green Scenario) on ES 60-Minute Chart

SPY has gapped up to trigger a Sornette melt-up set-up on the ES 60-minute chart.  Essentially the melt-up set-up is the little gray megaphone across the blue megaphone VWAP at 2362.  In a Sornette melt-up set-up, that little gray megaphone would break out upwards without a retrace to VWAP.

Usually you’d see a double bobble as the melt-up gets going.  The first could be a pullback from the megaphone top or a retest of the previous megaphone high.  The second should not take out the low of the first.  The second may be very fast and nearly invisible.

If instead SPY decides to fill its gap and the second bobble takes out the low of the first (purple scenario), it’s likely a megaphone is forming before a larger move down to the gray megaphone bottom.  It would probably mean a retest of 2300.

Either way, there’s a great chance ES is working its way to a new all-time high to put a new top on the red megaphone.  If the new high is going to cancel, we’d likely see a triangle form between 2300 and 2362ish and break out downward into a drop to at least 2150.

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.

Potential Sornette Melt-Up Set-Up

ES has a Potential Sornette Melt-Up Set-Up (Red Box, Purple Scenario) Across its Red Megaphone VWAP

ES has a Potential Sornette Melt-Up Set-Up (Red Box, Purple Scenario) Across its Red Megaphone VWAP

ES took a serious stab at the blue megaphone VWAP at 2362 yesterday. That’s all it needed to complete a top here and break out downwards past Tuesday’s low with an initial target of 2150.

But that serious stab at the blue megaphone VWAP put a potential Sornette melt-up set-up on the chart (inside red box).  Sornette melt-up set-ups typically break out upwards with a double bobble (purple scenario) that could break ES out through 2362 for a melt-up to the blue megaphone top and new all-time highs.

Sornette melt-up set-ups that fail usually fail in the second bobble when the price takes out the low of the first bobble. But you can’t count on getting a second bobble.  Sometimes the only place you can see a second bobble is on a two-minute chart.

If the Sornette melt-up triggers, the melt-up would usually take the form of either a series of price channels or a rising megaphone.

ES Appears to be Twining Up its Navy Blue Megaphone Top

ES Appears to be Twining Up its Navy Blue Megaphone Top Waiting for the Big Decision

Here’s what it looks like on the daily chart (from yesterday). If ES reenters the navy blue megaphone, it’s headed for at least 2150. If ES breaks out through 2362, it’s headed for new all-time highs and the price could go a lot farther than drawn on the chart.

ES is Mini-Plunging to Critical Decision Point at 2350

If ES Breaks Down Through the Red Megaphone VWAP at 2350 & Reenters the Navy Blue Top, It's Likely Going for At Least 2150

If ES Breaks Down Through the Red Megaphone VWAP at 2350 & Reenters the Navy Blue Top, It’s Likely Going for At Least 2150

ES has mini-plunged this morning through an important trend line on its 60-minute chart and is retesting a megaphone VWAP at roughly 2362.

It could turn up from here to another new all-time high.  That is the pink scenario and it could go a lot higher than I’ve drawn.  Any failure to reenter the navy blue line could result in a blow-off top.  I’ll post new scenarios if that develops.

If ES can get through 2362, the critical decision point is at roughly 2350, which is both VWAP of the red megaphone on the chart and the top of the navy blue megaphone and rising megaphone or price channel. The 2350 level should be a strong magnet for ES on this mini-plunge.

If ES breaks down through 2350, it would usually go for at least 2150 and could go as far as 1800 and set up an even bigger correction from there.

Note that even if ES is going to reverse at 2350, it would usually break that level a little to form a bottoming formation.  The question is whether ES can reenter that navy blue line.