SPY Small Price Channel Set-Up

SPY Price Channel in Rising Megaphone at Top of Larger Price Channel

SPY Price Channel in Rising Megaphone at Top of Larger Price Channel

Yesterday I posted a likely rising megaphone topping pattern (orange on chart above) on a year-long SPY price channel.

Today I wanted to show you a smaller price channel (orange) along the bottom of that orange rising megaphone.

SPY broke the top of that little price channel on June 2nd in the channel’s critical decision wave, where the price decides whether to break out into a melt-up or start a top.  SPY then put in a nice partial pullback into the channel.

Today SPY is poking through the channel top again.  This is where the melt-up set-up (green scenario) lives or dies.

SPY has to either get going screaming higher–and pronto–or it’s electing to form a channel top (purple or blue scenario).  The blue scenario should have been connected to the first purple wave down, not the second.  SPY could also form a rising megaphone or rising wedge for the little channel top.

Whatever little top the channel forms, it should also in the end work out to a head and shoulders top on the orange rising megaphone.

 

SPY Price Channel Likely Top

SPY's Pink Price Channel Set Up in 2016 but Failed to Break Out When It was Supposed to in December

SPY’s Pink Price Channel Set Up in 2016 but Failed to Break Out When It was Supposed to in December

SPY confirmed the pink price channel on November 21, 2016 when it broke out past the previous channel high on August 23, 2016.  SPY was then in its critical decision wave for the channel.  That’s where the price either sets up a breakout into a melt-up or starts a top.

What SPY did was tag the channel top, pull back a little, and then fail to break out decisively (a breakout within a melt-up set-up would have looked like the purple scenario).

You often see this when the channel is forming a rising wedge (green scenario) or rising megaphone (orange scenario) top across the price channel top.  The rising megaphone scenario is the favorite.

ES Trying to Top Update

ES would Usually Make You Redraw the Red Megaphone Top Twice

ES is Searching for the Red Megaphone Top and would Usually Make You Redraw It Twice

ES is recrossing the blue megaphone top, trying to draw a top before a move back to its bottom and ultimately the red megaphone bottom.

The top could take a lot longer and be a lot bigger than I’ve drawn and may look a lot different from what I’ve drawn.  But in general, as that top forms, it would make you redraw the red megaphone top several times before the topping pattern breaks out downwards.

ES Trying to Top

ES has Recrossed its Blue Megaphone Top and is Trying to Draw a New Top on its Red Megaphone Before a Trip to its Bottom

ES has Recrossed its Light Blue Megaphone Top and is Trying to Draw a New Top on its Red Megaphone Before a Trip to its Bottom

ES has reentered its light blue megaphone.  It’s topping for a drop to the bottom of the red megaphone and a retest of at least the navy blue megaphone VWAP at 2150.  If it breaks through 2150 it’s going for the navy megaphone bottom and possibly beyond.

Here’s what the light blue megaphone looks like on the 60-minute chart:

ES has Recrossed the Top of the Light Blue Megaphone - 60-Minute Chart

ES has Recrossed the Top of the Light Blue Megaphone – 60-Minute Chart

ES could retest the top of its light blue megaphone from inside and then start on a plunge all the way into year 2011 price territory.  But since ES is redrawing the red megaphone top, it is likely to spend more time drawing a small top up here before the plunge to the light blue megaphone bottom.

ES could return to the light blue megaphone top again after that but the larger formations make that unlikely.

So, we’re watching for a small top to form up here.  It will likely be a small megaphone top that makes you redraw the red megaphone top a couple of times.  Then ES is likely to start a move down that’s at least a serious try at the critical decision point at 2150.