Quick Top Could Be Important Top

ES Soared to the Top of its Red Megaphone Yesterday & the Top Here Could Be Quick

ES Soared to the Top of its Red Megaphone Yesterday & the Top Here Could Be Quick

I mentioned two days ago that Neely is looking for a fast, startling plunge to below 2200 to kick off the start of a multi-year bear market that will retest ES 1000.

Now ES has made it to the top of its red megaphone.  The break through the bottom of the megaphone on the last trip down was fast, so the top up here could be fast as well.  (Don’t get too excited.  It could also take forever.)

The top here could also be the tippy-top of the entire move off the 2011 crash (purple scenario).  Or a pullback to 2150ish could launch the market into a blow-off top.

ES could also start a new megaphone across the red or blue megaphone VWAP that could keep the price in a stall moving sideways for a good while before a big move down.

Megaphone and Neely

When Different Systems Call for the Same Thing

ES is Working on the Blue and Red Megaphones

ES is Working on the Blue and Red Megaphones

Neely put out another public call over the weekend for a major drop in the S&P. He called for an initial violent decline to below 2200 to “jolt” the markets and establish the pre-jolt high as the top for the next few years. He says the bear market will end with a retest of 1000 three to five years from now.

It just so happens that the violent decline to below 2200 scenario is virtually required by my own charts.  ES is working on the blue and red megaphones on the daily chart above.  It is redrawing the red megaphone top, which means it will need a trip to the red megaphone bottom after it completes the move out of the March 27 low.

ES also requires a retest of the navy blue megaphone VWAP at roughly 2150.  And a fast move to 2150 would complete both the mandatory retrace of the orange rising megaphone and mandatory retest of the navy blue rising megaphone bottom.

The Critical Decision Point

My trading system would then require a retest of the red megaphone VWAP at 2350.  From there, my system could put ES into a drop to some megaphone bottoms at 1800 and beyond or it could send ES off upwards into a blowoff top to 3000.

Neely expects the drop.

Neely put out some charts weeks and months ago that anticipated a top at right about where ES is now.  My megaphone set-ups suggest a top a bit higher, and taking a bit longer to complete.  But since ES is establishing a brand new top on the red megaphone, it could turn any time.

ES is retesting the top of some very long-term trading formations today (the navy blue line I keep writing about).  If it gets through 2400 today, it’s recrossing that line.

The bright blue megaphone VWAP is at 2385.

Glenn Neely runs a fund that trades his method and offers trading advice at Neowave.com and is author of The Neely Method, a book from which I’ve learned a number of valuable trading set-ups.

New ES Rising Megaphone Means Still Higher

ES Rising Megaphone Means Higher High

New High Puts a New Rising Megaphone on the Chart (Silver)

Alas, ES could not manage a fast stab down before the holiday weekend. Now, with another new all-time high, it’s confirmed a new rising megaphone (silver) on the chart.

Rising megaphones usually top with a head and shoulders that would require still another new all-time high after a pullback.  That means ES is clearly forming a significant top here.

We’ll likely see a head and shoulders form across 2350, and there will be a good chance of a megaphone right shoulder on the formation that extends the move sideways for weeks or months (purple scenario).  If we get a triangle right shoulder (green scenario), it will be a strong favorite to break out downwards to at least 2150 and almost certainly to the 1800ish.

ES Critical Decision Point

ES is at VWAP of its Red Megaphone and the Top of a Megaphone that's been Forming Since March 2016

ES is at VWAP of its Red Megaphone and the Top of a Megaphone that’s been Forming Since March 2016

ES is at the top of a megaphone that’s been forming on the daily and weekly charts since late March 2016 (see here).

It’s also at VWAP of the red megaphone in the 60-minute chart above.  It either reverses right here for a stab through 2300 or it’s up to another new all-time high and more work on a prolonged topping pattern that would suggest a big move down when it completes.

The first target in the fast stab down scenario would be 2250ish.  The ultimate target is a megaphone VWAP at 2150 that needs a retest.  A stab down that failed to reach 2150 before a new all-time high would be a set-up for a giant melt-up.

There are also crash set-ups on the daily and weekly charts.