IWM is Back at its 3-Year Megaphone Top

IWM 3-Year Megaphone

IWM is Back at its Pink Megaphone Top & Needs to Put in At Least a Good Stab at a Retrace to VWAP

IWM is back at its pink megaphone top and needs to put in at least a good try at a retrace to its VWAP at 112 before continuing much higher.

The faster it puts in that retrace, the more likely it is to reverse there or above there and go a lot higher (orange and green scenarios).

If IWM breaks through the pink megaphone top and spends a long time forming a topping pattern there, it’s more likely to crash all the way to the pink megaphone bottom (purple scenario) after.

The chart looks in transition to me from a market that expected to top here to a market that now wants to extend a lot higher.

Working on the Top of the Top before a Trip to 2000

ES is Working on a Rising Megaphone Top for its Red Thanksgiving Price Channel

ES is Working on a Rising Megaphone Top for its Red Thanksgiving Price Channel

ES keeps traveling up its weak little Thanksgiving price channel (red), but it’s already started forming a rising megaphone top inside (gray). These formations tend to top with a head and shoulders that breaks out at the same time as the rising megaphone.

That would be a set-up for a short to at least the blue megaphones’ VWAP at 2125 and more likely the bottom of the navy blue megaphone at roughly 2000.

From 2000 ES would have to return to VWAP of the navy and bright blue megaphones for a decision on whether to melt-up to another new high (green scenario), reverse into a retest of the January/February lows (purple scenario–unlikely), or start a new megaphone across VWAP (pink scenario) that would likely ultimately form a triangle that would break out upwards.

The green or pink scenarios would be strong favorites because ES has a rising megaphone on its daily chart that it needs to complete with a strong move up to significantly higher highs.

ES Price Channel in Critical Decision Wave

ES has Confirmed a New Small Price Channel (Red), Now in its Critical Decision Wave

ES has Confirmed a New Small Price Channel (Red), Now in its Critical Decision Wave

ES has broken through 2184 in low-volume Thanksgiving week trading but it used a small price channel (red) to do it. The red price channel is now in its critical decision wave, where it either sets up a breakout into a melt-up (purple scenario) or starts a top.

Because ES failed to retrace to the orange megaphone VWAP before breaking out, it’s more likely to form a top (green scenario).  I drew a head and shoulders top on the channel, but the top could also form a megaphone, rising megaphone, or rising wedge.

IWM New Rising Megaphone Confirmed

With Its New All-Time High, IWM has Confirmed the Navy Blue Rising Megaphone

With Its New All-Time High, IWM has Confirmed the Navy Blue Rising Megaphone

With its new all-time high, IWM confirmed a new rising megaphone (red) within a second new rising megaphone (navy blue).

It needs a head and shoulders top inside the red rising megaphone before it can break out of both to start a top for the navy blue rising megaphone.  The process of forming that second top is likely to lead to confirmation of one last new rising megaphone (bright blue).

What this all means is that IWM is likely to work its way higher before a drop to the bottom of its range of the past few years and then a move up to another new high.

Another way of looking at it is that IWM continues to work on a giant megaphone across 113 that it began in late 2013 and that it will be working on for some years to come.

Flat-Topped Megaphones

ES has a Flat-Topped Megaphone (Orange) on the 60-Minute Chart

ES has a Flat-Topped Megaphone (Orange) on the 60-Minute Chart

In addition to all the formations on the daily chart, ES has a flat-topped megaphone (orange) on the 60-minute chart.

ES is putting in a pullback from its top right now, which means it ought to reverse any time for a breakout through the top.  A failure to reverse for a breakout through the top would mean a breakout through the bottom with a target of 1900.

ES could also put in a fake breakout through the orange megaphone top to retest 2184.  A reversal at 2184 would set up the navy blue flat-topped megaphone on the chart.  After a trip to that megaphone’s bottom, ES should make another run at 2184, but it could also collapse through the formation bottom to 1900.

Megaphones in Megaphones

ES is Back at the 2125 VWAP of its Pink and Red Megaphones

ES is Back at the 2125 VWAP of its Pink and Red Megaphones

ES has just put in a megaphone fifth-wave melt-up to the top of its blue bottoming megaphone. That took it back to the 2125 VWAP of its red and pink megaphones.

ES needs to retrace to the blue megaphone VWAP.  It could put in a topping pattern at 2125 before heading down and that would make it legal for a downwards breakout from the pink and red megaphones (green scenario).

But when important events are happening, like an election, sometimes those retraces have to wait.  In that case, ES could go for the red megaphone top first to set up a big flat-topped megaphone on the chart (purple scenario)

Or ES could start another new megaphone across 2125 (pink scenario).  If it does that, the navy blue triangle is likely forming.

ES is Retesting its Red Triangle Bottom after Bouncing Off its Potential Navy Blue Price Channel

ES has Bounced Off its Potential Navy Blue Price Channel

ES has returned to its 2125 VWAP after a bounce off the bottom of a potential price channel (navy blue) on the daily. This channel has formed late in a move, so it’s most likely to fail with a break through the bottom before confirming with a new channel high. If it does confirm with a new channel high, it will be starting a topping formation with that new high.

ES Megaphone to Triangle Retest

ES Got to its Retest of its Red Triangle Bottom in a Megaphone (Bright Blue)

ES Got to its Retest of its Red Triangle Bottom in a Megaphone (Bright Blue)

ES has gotten to its retest of its red triangle bottom within a megaphone (bright blue) on the 60-minute chart. The last wave up was a 5th wave melt-up gap-up.

That means ES is a favorite to return all the way to the blue megaphone bottom and eventually break out downwards from it.

ES Retesting Triangle Bottom

ES is Retesting its Red Triangle Bottom after Bouncing Off its Potential Navy Blue Price Channel

ES is Retesting its Red Triangle Bottom after Bouncing Off its Potential Navy Blue Price Channel

ES is retesting its red triangle bottom after a bounce off the bottom of its potential navy blue price channel. The channel needs a new high before a break of the channel bottom to confirm.

But huge price channels that form at the top of a melt-up usually don’t confirm and, if they do confirm, usually start forming a top right after they do.

ES formed a megaphone to whip the price back to the retest of the red triangle bottom, and the wave to the retest looks like a megaphone 5th wave melt-up.  That means ES is a favorite to head down from here to break the navy price channel bottom before the channel confirms.

ES could form a triangle here before that break (green scenario).  The next big support is at 2050.  A genuine breakdown through 2050 suggests a retest of the January/February lows.

If ES should reenter the red triangle before breaking the navy price channel bottom, it will likely head for 2184 again to try for a breakout.  Any breakout (blue scenario) would be limited by the pink topping megaphone inside the navy price channel.  ES wouldn’t be legal for a genuine breakout before a retrace to the megaphone VWAP at roughly 2150.

Again, any new high within the navy blue price channel would likely be the start of a top.