QQQ Chart All Gnarled Up in Megaphones Again

QQQ Megaphones in Megaphones on 60-Minute Chart

QQQ Megaphones in Megaphones on 60-Minute Chart

QQQ is all gnarled up in megaphones for opex week.  Right now it’s megaphoning across VWAP of the red megaphone on the 60-minute chart.

The blue megaphone at the top of the red megaphone needed a retrace to VWAP and this morning’s little gap up took care of that.  Now the little orange megaphone needs a retrace to at least its VWAP at roughly 131, and it’s a favorite to go for the red and orange megaphone bottoms (green scenario) unless it gets bogged down in a new megaphone across 131 (pink scenario).

The pink scenario would usually mean a triangle is forming between the red megaphone high and low.

There is no fast escape from this muddle.  Any move to a new red megaphone high or low will require a retrace to 131 before a real breakout because of the interior megaphones.

ES Break-In and Breakout

ES is Back Inside Its Navy Blue Megaphone & has Broken Out of its Orange Rising Megaphone

ES is Back Inside Its Navy Blue Megaphone & has Broken Out of its Orange Rising Megaphone

ES is back inside its navy blue & light blue megaphones and has broken out of its orange rising megaphone after a legal top.

That means we ought to see at least 2150 before we see ES break out of the navy blue megaphone again, and we could see the navy megaphone bottom. If ES makes it to the navy blue megaphone bottom, we could even see the megaphone break out downwards into a huge correction after a retrace to its VWAP.

ES has Formed a Falling Megaphone (Red) that will Eventually Need a Retrace to its Top

ES has Formed a Falling Megaphone (Red) that will Eventually Need a Retrace to its Top

Big megaphone moves down often start with a price channel melt-down set-up. But instead, ES has set up a falling megaphone (red on 60-minute chart) since its March 16 retest of the high.

ES could form a price channel inside the red falling megaphone and melt all the way down to 2150 inside it (green scenario).  Or the move to 2150 could be a lot messier, with ES forming an inverse H&S bottom around here before retracing to the red falling megaphone top and heading down again (purple scenario).

If we get the purple scenario, it would likely be slow moving enough for the move to the red falling megaphone top to be another retest of the big navy blue megaphone top from inside.

Anyway, at this point you should be short as long as ES is inside that red falling megaphone.  If you don’t mind hanging on through retraces and you’re not playing something time sensitive like options, you could be short unless ES breaks back out of the navy blue megaphone top.

This would usually be a strong short set-up.  The only thing nagging at me about it is that ES failed to complete a potential extension in the orange rising megaphone and put in an indecisive, awkward top on the navy blue megaphone.  That means you have to take your stops seriously in case ES heads up one more time to put a bigger top up there.

Potential Sornette Melt-Up Set-Up

ES has a Potential Sornette Melt-Up Set-Up (Red Box, Purple Scenario) Across its Red Megaphone VWAP

ES has a Potential Sornette Melt-Up Set-Up (Red Box, Purple Scenario) Across its Red Megaphone VWAP

ES took a serious stab at the blue megaphone VWAP at 2362 yesterday. That’s all it needed to complete a top here and break out downwards past Tuesday’s low with an initial target of 2150.

But that serious stab at the blue megaphone VWAP put a potential Sornette melt-up set-up on the chart (inside red box).  Sornette melt-up set-ups typically break out upwards with a double bobble (purple scenario) that could break ES out through 2362 for a melt-up to the blue megaphone top and new all-time highs.

Sornette melt-up set-ups that fail usually fail in the second bobble when the price takes out the low of the first bobble. But you can’t count on getting a second bobble.  Sometimes the only place you can see a second bobble is on a two-minute chart.

If the Sornette melt-up triggers, the melt-up would usually take the form of either a series of price channels or a rising megaphone.

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

Here’s what it looks like on the daily chart (from yesterday). If ES reenters the navy blue megaphone, it’s headed for at least 2150. If ES breaks out through 2362, it’s headed for new all-time highs and the price could go a lot farther than drawn on the chart.

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.