Twining Up Megaphone Top

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

ES appears to be twining up its navy blue megaphone top avoiding a decision on whether to break out of its orange rising megaphone or go for another new all-time high.

There’s a small megaphone up near the high that could use a retest of its VWAP at 2362, but something big, like a vote on the Obamacare replacement bill, could get things moving before ES reaches that target.

A breakout from the orange rising megaphone sets the green or purple scenario in motion.  Decisive liftoff from the navy blue megaphone top sets the blue scenario in motion.  The orange rising megaphone is steep, so the blue scenario could go a lot further than I’ve drawn it.

Short Set-Up to At Least 2150, But Keep an Open Mind a Little Longer

ES is Back Inside Its Navy Blue Line - That's a Short Set-Up to At Least 2150

ES is Back Inside Its Navy Blue Line but Not Yet Broken Out of its Orange Rising Megaphone

ES is back inside its navy blue megaphone/rising megaphone top. That’s a short set-up for a move to at least the light blue megaphone VWAP at 2150 (green and purple scenarios).

But ES hasn’t broken out of its orange rising megaphone yet and the recross of the navy blue line is still very small, so I would keep an open mind and a tight stop until ES has retested the navy blue line from inside and broken out of the orange rising megaphone.

If ES breaks back out of the navy blue line, the orange rising megaphone is extending and we’re in the blue scenario.  In the pre-HFT days, that would have been a rare occurrence, but the bots these days like to do small ritual breaks of important lines before reversing.  In that case, the price move could be bigger than I could fit on the chart.

The House vote on Ryancare is Thursday.

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.

 

ES Potential Price Channel

ES is Trying to Set Up the Blue Price Channel to Get to a New High to Confirm the Silver Rising Megaphone

ES is Trying to Set Up the Blue Price Channel to Get to a New High to Confirm the Silver Rising Megaphone

ES got bought a little bit at the bottom of the potential blue price channel, but it usually does. It’s trying to work its way to a new high before breaking the channel bottom to confirm both the channel and the silver rising megaphone.

If the blue price channel confirms with a new channel high, it will be in its critical decision wave for starting a stop (green scenario) vs. breaking out into a melt-up (orange scenario).

If instead it can kill the channel before confirming, and break down through the red megaphone VWAP at 2350, it’s going to the red megaphone bottom to start a likely much bigger correction (first target 2150).

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.

IWM Backs Away From Megaphone Top

IWM Backs Away a Second Time from its Red Megaphone Top

IWM Backs Away a Second Time from its Red Megaphone Top

Every time I think the market can’t possibly correct, I look at the long-term IWM chart.

Not only do the 3-year+ red megaphone and blue rising megaphone require a retrace to at least the red megaphone VWAP at roughly 113, but IWM continues to tag its red megaphone top and back away from it.

The market lacks the enthusiasm to even break IWM out of the red megaphone for a topping pattern on top.

IWM could also correct all the way to the red megaphone bottom (purple scenario).  The purple scenario becomes the favorite if IWM breaks through the red megaphone top to put a big head and shoulders pattern on 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.

Critical Retest

ES is Retesting the Top of its Red Megaphone from Inside

ES is Retesting the Top of its Red Megaphone from Inside

ES made a legal breakout from its red megaphone on March 1.  It reentered the megaphone on March 6 and is now retesting its top from inside.

Usually that would mean ES is going for the red megaphone bottom.  If it goes for the red megaphone bottom it will be breaking out of the light blue rising megaphone and tagging the bottom of the orange rising megaphone.  It will also be reentering a megaphone that started forming in April 2016 (navy blue line).

Once ES recrosses that navy blue line it would usually keep going to at least 2150, and 1900 or even 1800 are possible.  This could even be the start of a correction to year-2011 territory (Neely is looking for a correction like that, though it would surprise me).

If ES breaks back out of the red megaphone instead of just retesting its top, it means the light blue rising megaphone is extending (purple scenario, and the extension could last longer and go further).  If that happens, I’ll draw up the new scenarios Monday.

Next week is triple witching.  That means if a directional move can get going, it could be huge.  That also means that atypical recrosses of important lines are more likely than usual.