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.

 

Set-Up for Dip to 2150 Still Alive

ES is Retesting the Top of its Red Megaphone from Inside on the June Contract

ES is Retesting the Top of its Red Megaphone from Inside on the June Contract

ES is retesting the top of its red megaphone from inside on the June contract. That means Friday’s set-up for a dip to at least 2150 is still alive.

Again, a trip to the red megaphone bottom would take ES across the top (navy blue) of long-term megaphones and a price channel or rising megaphone and set up the dip to at least 2150.  Another upwards breakout from the red megaphone could put a larger head and shoulders on top of the navy blue line or launch ES into a price channel melt-up set-up and blow-off top.

Retesting Critical Line

ES is Retesting the Top of its Big Megaphone and Navy Blue Rising Megaphone/Price Channel

ES is Retesting the Top of its Big Megaphone and Navy Blue Rising Megaphone/Price Channel

ES is retesting the top (navy blue) of its big megaphones and rising megaphone or price channel. It’s a rising megaphone if you count the election night tail. It’s a price channel if you don’t.

It’s best to keep an open mind about tails, and just act on the price action from here.

If ES turns up from here, it’s making either a bigger topping pattern at the big megaphone top (purple scenario), or heading up into a price channel melt-up set-up and blow-off top (light blue scenario).

If ES recrosses the navy blue line, it’s likely going for at least 2150 and could go as far as the red megaphone bottom.  The green scenario, with a smaller top here, would be more likely to reverse at 2150 for new highs.  With the purple scenario’s larger top, we’d be more likely to see the red megaphone bottom.

If ES heads up from here into the purple vs. blue scenario, the critical decision point will be at the gray roll-up price channel top.

ES Topping Update

ES is Going for a Tag of its Megaphone/Rising Megaphone/Channel Top as it Works on a Likely Head and Shoulders

ES is Going for a Tag of its Megaphone/Rising Megaphone/Channel Top as it Works on a Likely Head and Shoulders

ES is trying for a retest of is red and blue megaphone tops and navy blue rising megaphone/price channel top  (all the topmost navy blue line).

If it can actually get there before another new high it could put in a very small right shoulder bounce before reentering the megaphones (orange scenario), which would likely mark the top before a dip with a target of at least 2150 and potentially the 1800 area.

But ES is more likely to go for another new all-time high before reentering those formations (green scenario).  The green scenario could be bigger and take longer than the way I’ve drawn it.

A faster, smaller head and shoulders top here would leave open the possibility of a breakout into a price channel melt-up set-up for a blow-off top.  In that case, ES would likely take a quick stab at 2250 and then blast off.  The target for that could be hundreds of points higher.

ES is moving too slowly for the blow-off top to be a likely scenario, but an event like fast approval of the Obamacare replacement bill could set off a move like that.

Rising Megaphone Upward Breakouts

DIA Long-Term Rising Megaphone with Price Channel Set-Ups

DIA Long-Term Rising Megaphone with Price Channel Set-Ups

Yesterday I posted DIA’s rising megaphone with a classic megaphone/head and shoulders topping and retrace scenario (above).

GLD Put in a Classic Top Before Retracing to Its Red Rising Megaphone Bottom

GLD Put in a Classic Top Before Retracing to Its Red Rising Megaphone Bottom

Gold put in a similar top before retracing to its red rising megaphone bottom. If it can break out through the bottom here, it will retrace to the red rising megaphone bottom.

AMZN Broke Out Upwards from its Blue Rising Megaphone

AMZN Broke Out Upwards from its Blue Rising Megaphone into a Rising Wedge

But rising megaphones don’t always complete in the classic way.  There are ways they can extend.  For example, AMZN failed to break out its blue rising megaphone bottom.  Instead it broke out the top and converted a classic head and shoulders top on the rising megaphone into a huge rising wedge top (red).

It will likely form a megaphone up here to complete the rising wedge.  This megaphone could break out in either direction once it completes.

AAPL Extended its Toop on the Blue Rising Megaphone

AAPL Extended its Top on the Blue Rising Megaphone

And AAPL, instead of breaking down through its blue rising megaphone bottom, converted its classic H&S top into a giant rising megaphone top that could extend as well.

These are not the only ways for rising megaphones to extend.  For example, any wave within a rising megaphone can extend to form an interior rising megaphone.  And a rising megaphone can put in a new high after breakout through the bottom, before retracing to its target, under certain conditions.

The point is that every topping formation can break out in either direction and every rising wedge or megaphone can break out in either direction.  There are always ways for moves to extend as the market gets new information that may challenge the assumptions that built a trading formation.

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.