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.

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.

Head and Shoulders vs Megaphone

The Green Scenario is the Classic Way to Complete the Orange Rising Megaphone

The Green Scenario is the Classic Way to Complete the Orange Rising Megaphone

ES has pulled back to roughly VWAP (volume-weighted average price) of the blue and red megaphones. A reversal here would set up ES for a classic head and shoulders top (green scenario) on its orange rising megaphone.

ES would usually then break out of both the H&S and rising megaphone for a quick dip to the rising megaphone bottom at 2150.  Because of larger formations on the daily chart, this would be a dip to buy.

If ES breaks the orange rising megaphone bottom before a new high inside the formation, it will like put in the retrace to 2150 in the purple megaphone scenario.

A Rising Megaphone (Navy) on the Daily Chart Makes a New High After a Dip to 2150 a Strong Favorite

A Rising Megaphone (Navy) on the Daily Chart Makes a New High After a Dip to 2150 a Strong Favorite

More ES Rising Megaphone Scenarios

The Key to Rising Megaphones is to Let Your Position Run Until You Have a Reason Not To

The Key to Rising Megaphones is to Let Your Position Run Until You Have a Reason Not To

The key to rising megaphones is to let your position run until you have a good reason not to. Never anticipate the time to exit or reverse your position when you’re in a rising megaphone, because rising megaphones can extend and extend and because they always give a clear set-up when it’s time to change.

Right now I’m not sure whether the proper top of this rising megaphone is the blue line or the orange line I drew for a top.  I think it’s the orange line, and the smaller waves are just an interior rising megaphone, but I’m not sure.

If it’s the blue line, there’s no way for ES to put a proper H&S top inside the rising megaphone, which means it’s already in a megaphone (red) that will limit its future upside prospects after its likely dip to 2150.

If it’s the orange line, the purple scenario is the most likely, with the blue scenario representing another rising megaphone extension within the orange rising megaphone before ES even begins to top for a dip to 2150.

The farther ES can go before a dip to 2150, the more exciting its prospects after that dip.

I’ll do a post on QQQ tomorrow.