ES Big Flat-Bottomed Megaphone on the Weekly Chart

Red Flat-Bottomed Megaphone

ES Flat-Bottomed Megaphone on the Weekly Chart

ES Flat-Bottomed Megaphone on the Weekly Chart

The technical target for the ES upwards breakout from its big head and shoulders is roughly 2400. But ES also has a giant flat-bottomed megaphone (red) on the weekly chart, and ES could go all the way for its top on this move.

Orange Rising Megaphone

However, ES has formed a rising megaphone (orange) on the way up out of its early 2016 low, and it has just reached the top of that formation.  Moves like this don’t end on an exact touch on a formation top, so ES will either pull back here and put in a new high inside the rising megaphone, or it will break through the top to put in a topping pattern on its top.

Mandatory retrace to 2150

ES has a mandatory retrace requirement at 2150 (from megaphones discussed in earlier posts), which happens to be at the orange rising megaphone bottom if ES gets there fairly soon.  If ES breaks down through 2150, it will also be breaking out of the orange rising megaphone, setting up a trip to at least its bottom but more likely the bottom of the red flat-bottomed megaphone.

Big Moves Ahead

If ES reverses on the dip to 2150 and puts in a new high, it will be redrawing the orange rising megaphone for a huge move.  Any breakout to another new high before a small breakout through the red megaphone bottom would be an upwards breakout from the red flat-bottomed megaphone with a target roughly 600 points higher.

If ES instead makes it to the bottom of the red flat-bottomed megaphone, it can either break out into a crash with a technical target 600 points lower, or it can put in a fake breakout that reenters the flat-topped megaphone with a target of a small new high in the formation.

Other Formations Confirm

I’ve been posting for months on other trading formations (megaphones and rising megaphones) on the ES long-term charts. Those trading formations confirm the set-ups and targets from the trading formations discussed above.

QQQ Maxes Out Price Channel Melt-Up

QQQ is Maxing Out the Price Channel Melt-Up Set-Up Inside Its Blue Rising Wedge

QQQ is Maxing Out the Price Channel Melt-Up Set-Up Inside Its Blue Rising Wedge

QQQ confirmed a price channel melt-up set-up at its last trip to the bottom of the blue rising wedge on the daily chart.  Now it’s maxed out its price channel roll-ups and is heading up into the start of a top.

QQQ can start the top on this melt-up anywhere inside the rising wedge or a little bit through its top.  The only thing it can’t do is complete this rising wedge with an exact tag of the rising wedge top.

The top on this melt-up within the rising wedge can end with a megaphone, head and shoulders, triangle top or smaller rising wedge top.  QQQ could even tag its blue rising wedge top, return to the rising wedge bottom, and then extend the blue rising wedge with two more higher highs between tags of the wedge bottom.

Once ES completes the blue rising wedge, it must retrace to at least the level of the lowest touch on its bottom.  But it could correct a lot further.

When QQQ Retraces to Its Blue Rising Wedge Bottom, It's Also Retracing To the VWAPs of Two Megaphones & Could Collapse to Their Bottoms

When QQQ Retraces to Its Blue Rising Wedge Bottom, It’s Also Retracing To the VWAPs of Two Megaphones (Gray & Navy) & Could Collapse to Their Bottoms

When QQQ retraces to its blue rising wedge bottom it will also be putting in a mandatory retrace to the VWAPs (volume-weighted average prices) of two long-term megaphones (gray and navy on the chart above). If QQQ breaks out through those VWAPs, the next target would be the megaphone bottoms.

Ultimately QQQ must retrace to the bottoms of the blue and silver rising megaphones on the long-term chart above (the blue formation’s bottom is at 42).  But QQQ could extend this move up (purple and rose scenarios) before completing that retrace.

ES Critical Decision Point

ES has Reached the Top of its Blue Rising Megaphone and Rose Megaphone - Continuing Up From Here would Imply a Bigger Drop After

ES has Reached the Top of its Blue Rising Megaphone and Rose Megaphone – Continuing Up From Here would Imply a Bigger Drop After

ES has reached the top of its blue rising megaphone and rose megaphone. The rose megaphone requires a pullback to its VWAP (volume-weighted average price) at 2150 to be legal for a breakout upwards.

The orange rising megaphone also requires a pullback after completion to 2150.  The blue rising megaphone eventually requires a pullback to 1960.

This is one of those spots where ES either has to stop for a quick immediate dip to 2150 (purple scenario) that would imply another new high after the dip or it’s going to break through those formation tops and put in a top that requires a much bigger pullback (green scenario).

Little Price Channel is Key to What’s Next

ES has Formed a Little Price Channel (Navy Blue) at the Top of its Purple Megaphone and Blue Rising Megaphone

ES has Formed a Little Price Channel (Navy Blue) at the Top of its Purple Megaphone and Blue Rising Megaphone

ES has formed a new little price channel (navy blue) overnight. This price channel is now in the critical decision wave for starting a top vs breaking out into a melt-up.

Since ES just tagged the top of its blue rising megaphone, it’s more likely this channel will start a top. If it does break out into a melt-up, we’ll likely be redrawing that rising megaphone.

Price Channel Melt-Up (Green) vs Topping (Purple)  Scenarios

Price Channel Melt-Up (Green) vs Topping (Purple) Scenarios

If ES does break out into the green melt-up scenario, we’ll be drawing a series of roll-up melt-up channels on the chart that will tell us when the move is ending. ES could easily go for 2400.

If ES begins a top instead, it is likely to be the top before a pullback to 2150.

ES Back at Megaphone Top

ES is Back at Its Red Megaphone Top After Breaking Through 2300

ES is Back at Its Red Megaphone Top After Breaking Through 2300

ES is back at its red megaphone top after breaking through 2300.

It can start a head and shoulders top here with a quick retest of 2300 to put in the left shoulder of a head and shoulders and then bogging down at the megaphone top (green scenario) , or it can put in the quick retest and then blast off to redraw and extend the blue rising megaphone (purple scenario).

ES Triangle Would Mean Bog-Down Scenario

The Blue Triangle would Confirm a Bog-Down Scenario

The Blue Triangle would Confirm a Bog-Down Scenario

Friday’s post was about how ES needed to make a fast break through 2300 and keep going to avoid getting locked into a bog-down scenario.

Now it looks like it may be forming the bright blue triangle on the chart. That triangle would all but lock it into the bog down scenario.

The bog-down scenario represents ES trapped in a megaphone (red on chart) across roughly 2250.  That limits ES’s potential upside after its coming dip to 2150ish to roughly the top of the red megaphone.

ES will be a favorite to correct to at least 1960, and possibly 1800ish, after that.

Neely is looking for that pullback to turn into a much larger correction.  I have set-ups for that on the long-term charts, but also a set-up for this move up out of the 2011 crash to extend.

 

ES Bog Down vs Escape

ES Either Makes a Dash for It Now or It's Going to Get Bogged Down Moving Sideways in the Red Megaphone

ES Either Makes a Break for It Now or It’s Going to Get Bogged Down Moving Sideways in the Red Megaphone

ES either makes a break for it through 2300 to extend the orange rising megaphone with an interior rising megaphone (purple scenario), or it’s going to get bogged down moving sideways in the red megaphone.

In the green scenario, the red megaphone would likely be a topping megaphone before a retrace to at least 1960ish and possibly the 1800 area.  The green scenario could represent a sideways move that eats up months.

QQQ Price Channel vs Rising Wedge Set-Ups on 60-Min Chart

QQQ is Either Putting in the Second Pullback of a Rising Wedge Top  or a Pullback within the Red Price Channel Before a Move into the Start of a Top

QQQ is Either Putting in the Second Pullback of a Rising Wedge Top or a Pullback within the Red Price Channel Before a Move into the Start of a Top

QQQ is pulling back from a pierce of the red price channel top. The red price channel is a roll-up acceleration price channel launched from the blue confirmed price channel.

Because QQQ pierced the red channel top, it’s not likely to retrace all the way to the channel bottom before breaking out to a new high through the red channel top.

That means the next wave up will put a rising wedge top on the 60-minute chart.  With both the price channel set-up and the rising wedge set-up, QQQ is likely to complete this move up with either an extension of the rising wedge or a sideways topping formation like a head and shoulders top or a megaphone top.

QQQ is Completing a Larger Rising Wedge (Purple) within a Megaphone (Navy Blue) on the Daily Chart

QQQ is Completing a Larger Rising Wedge (Purple) within a Megaphone (Navy Blue) on the Daily Chart

QQQ’s rising wedge on the 60-minute chart is an extension of a rising wedge on the daily chart (purple on chart above).  Rising wedges have a technical retrace target of the lowest touch on the formation bottom.  They don’t always put in that full retrace, but because this rising wedge has occurred within a confirmed megaphone (navy blue), QQQ is a strong favorite to put in that retrace.

That’s because megaphones almost always retrace to VWAP (the megaphone volume-weighted average price) before breakout.

QQQ could also pull back all the way to the navy blue megaphone bottom.

QQQ Rising Megaphones on Daily/Weekly Charts

QQQ Rising Megaphones on Daily/Weekly Charts

QQQ is completing the blue rising megaphone on the daily/weekly charts and will eventually have to retrace to the formation bottom (the green scenario would be a classic way to do this).

But QQQ could extend this move up by confirming the orange rising megaphone.  The purple scenario would be a classic way to do that.