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.
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.