ES End Of Day
Trader Moe | May 27, 2015 01:00AM ET
ES is likely in the middle of a falling megaphone (orange on chart) within a topping megaphone (purple on chart) across the top (red line) of the triangle that began forming in February.
The reentry through the red triangle top is consistent with what you’d tend to see with a major topping triangle.
ES has completed and broken out of a head and shoulders at the all-time highs (bright blue neckline, which is roughly at the red triangle top).
TRIN closed at 2.20. A close that high tends to be followed by a rally.
Plus, ES completed a very small bottoming megaphone at the end of day and broke out upwards from it (see comments on earlier post for chart).
All of this is consistent with a swing up to the top of the orange falling megaphone for a retest of the bright blue H&S neckline at roughly ES 2120. A reversal there would lead to another swing to the falling megaphone bottom around ES 2080 (green scenario on chart).
But there’s already a legal smaller falling megaphone on the chart and ES could also just keep going through the neckline and up to the retrace target at roughly 2130 (purple scenario).
The smart poker move would be to let more bears in at the neckline for a swoosh to ES 2080, so that’s what I think the market will do.
ES 2080 is a major multi-megaphone VWAP level and I can almost guarantee there will be buying there (plus major bear flight) for a melt-up into the right shoulder of a larger H&S with a neckline there. The right shoulder target would be the level of the highest touch on the orange falling megaphone top.
After that melt-up the price should return to the purple megaphone bottom a little below 2050.
From there it will bounce to at least 2080 once more. It would usually reverse at 2080 for a breakout downwards from the purple megaphone but at this point another trip to the purple megaphone top can’t yet be ruled out.
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