Potential Melt-Up Set-Up

Potential Sornette Melt-Up Set-Up within Potential Rising Megaphone

Potential Sornette Melt-Up Set-Up within Potential Rising Megaphone

ES has a potential mini Sornette bubble set-up within a potential rising megaphone (blue) on its 5-minute chart.

Watch for a higher high on the megaphone across 2101, then a retrace to VWAP and breakout upwards (purple scenario), or for the new megaphone high to turn into a double bobble and break out upwards (green scenario).

Sornette set-ups that fail do it most often on a failed second bobble. In that case, ES may be topping here for a dip to 2073.50 and possibly 2020 and the bottom of the ES/SPY 3-year+ price channel.

Potential Mini Melt-Up Set-Ups on ES

ES Potential Melt-Up Set-Ups to Blue Megaphone Top

ES Potential Melt-Up Set-Ups to Blue Megaphone Top

It’s getting very late for ES to carry out a dip before starting its FOMC vigil.

It could still happen today (pink scenario, or a reversal at the blue megaphone VWAP), but the blue megaphone would usually put in one final wave to the top in this spot, it would usually be a melt-up, and two potential melt-up set-ups have just appeared on the short-term charts.

ES put in a classic Sornette lumpy top overnight.  A double bobble breakout upwards from that would be a set-up for a melt-up to the blue megaphone top (purple scenario).  If the set-up is going to fail, it would typically fail at the double bobble breakout area, which means it would be failing at the blue megaphone VWAP.

There’s also a potential price channel (purple) on the chart if the lumpy top can retrace a bit more.  From the channel bottom you’d expect a fast move up to pierce the channel top, a partial retrace into the channel, and then a breakout into a series of increasingly steep melt-up channels (green scenario on chart).

The Euro Continues to Mass at Trend Line

The Euro Continues to Mass Just Beneath the Top of its Orange Falling Megaphone

The Euro Continues to Mass Just Beneath the Top of its Orange Falling Megaphone

The euro continues to mass beneath the top of its orange falling megaphone.

When a price keeps clinging to a line like this, it’s going to break out through that line.  The question is whether the euro is going to break out into a price channel melt-up set-up (green scenario), or break out to continue moving sideways and confirm a longer-term trading range (purple and pink scenarios).

A breakout through the orange falling megaphone top is a set-up to go long to at least the top of the silver price channel if that channel hasn’t been killed before the breakout.  Then we’d have to see what kind of channel retrace the euro puts in.  A retrace to the channel bottom would kill the potential melt-up set-up.

If the euro kills the channel before breaking out through the orange line, it’s probably forming a triangle.

Potential Melt-Up Set-Up

And Here's the Lumpy Top for the Potential Sornette Mini-Bubble Set-Up

And Here’s the Lumpy Top for the Potential Sornette Mini-Bubble Set-Up

ES now has a right shoulder on its potential inverse H&S plus a lumpy top set-up for a potential Sornette mini bubble.

ES needs to break out past the lumpy top high, put in a partial retrace, break out again to a new high, not take out the low of the first breakout retrace, and then keep going up.

Again, first target is ES 2093.50, where there’s another potential inverse H&S neckline. If that breaks out upwards, the target is roughly ES 2111.

ES Melt-Down vs Melt-Up Set-Up

ES has Formed the Lumpy Top of a Potential Sornette Melt-Up Set-Up

ES has Formed the Lumpy Top of a Potential Sornette Melt-Up Set-Up

ES has broken out sideways through the top of its navy blue falling megaphone and formed a classic Sornette lumpy top of the type that could lead into a melt-up (green scenario).

If ES is going to melt-up, you will see it take out the top of the lumpy top, retrace part way into it, then take out that high, retrace partly again, and take off, with each retrace getting smaller and smaller.

If the Sornette melt-up is instead going to fail, it usually happens with the second of the two bobbles just described. If it takes out the low of the first retrace, usually the melt-up will cancel. Then you’d typically see something like an H&S form and take ES down to a lower low for the falling megaphone move (black scenario).

If ES puts in a lower low, redraw the top of the navy blue falling megaphone and wait for a breakout through that top to switch to long for a retrace to at least 2110.

Mini Sornette Bubble on Euro

There's a Mini Sornette Bubble on the Euro About to Complete Part 2

There’s a Mini Sornette Bubble on the Euro About to Complete Part 2

The euro is in Part 2 of a mini Sornette bubble.

It should retrace to the area of the lumpy top soon and then either reverse into a Part 3 bigger than Part 2 or take out the lumpy top low to head further down.

The euro had a potential price channel melt-up set-up on the chart. This bullish excess makes that set-up extremely doubtful.

Potential Mini Melt-Up Set-Up

ES is Forming a Potential Mini Melt-Up Set-Up Right Now

ES is Forming a Potential Mini Melt-Up Set-Up Right Now

ES is right now, as I post this, in the process of trying to complete a Sornette bubble formation lumpy top. Lumpy tops are megaphone-like formations that tend to lead to melt-ups if they complete and break out upwards.

The lumpy top could still put in a lower low (green scenario).

Or it could go straight into an attempted breakout (purple scenario).

Breakouts that fail tend to make a new high for the formation, small retrace, then another new high and a larger retrace that takes out the low of the first retrace.

Breakouts that succeed tend to lead to short squeeze melt-ups.

Assuming we get a successful upward breakout, the first target is the top of the orange falling megaphone.  From there the price could make a small retrace, then a genuine breakout.  Or it could head down fast and hard to a lower low before breaking out of the orange falling megaphone.

ES Is Back Inside Topping Triangle But Put In A Falling Megaphone To Get Here

ES Formed a Falling Megaphone (Red) to Get Back Down Here

ES Formed a Falling Megaphone (Red) to Get Back Down Here

ES is back inside the topping triangle it started forming in February and back inside a fake inverse head and shoulders, cup and handle, and other trading formations.

Topping triangles usually make fake breakouts to complete.

However, ES formed a falling megaphone (red on chart above) to get back down here.

ES could turn right about here to redraw the little H&S neckline on its short-term chart or it could keep going to the 2080 area before reversing.  But it should retrace to roughly the level of the first touch on the top of that red falling megaphone.

That means we’d usually see a big melt-up right shoulder coming up here.

If ES works its way to the top of the falling megaphone but doesn’t break out, it could put in another wave down in the formation before the big retrace right shoulder.

This is a great spot to start watching for mini Sornette bubble melt-up set-ups.