ES: Set-Ups For 2100 Vs. 1750

 | Jan 12, 2016 12:38AM ET

SPX Daily Chart

ES Came Close to the Potential Triangle Bottom Line that Everyone is Watching

The SPX bounced today on the approach to the potential triangle bottom (orange) that everyone is watching. Is that it? Is the move over?

I’d be more impressed by the bounce if ES had melted up harder and if it hadn’t spent the entire day putting in a redo of Friday.

ES 25D-2M Chart

ES Spent the Day Putting in a Repeat of Friday

So how do you tell whether to get long here for a trip to the triangle top?

ES has a confirmed falling megaphone on its 15-minute chart (blue in chart below). Falling megaphones usually bottom with an inverse H&S. Usually the right shoulder is a pullback from the falling megaphone top, but occasionally the price will break out and the right shoulder will be a retest of the formation top.

ES 25D-2M Chart

ES Falling Megaphone

If ES breaks out of the blue falling megaphone, its minimum target is 2000 and it could melt up all the way to the big orange triangle top.

But ES is still a favorite to put in a lower low first to complete a proper inverse H&S, and there is nothing on the chart at the moment to suggest that it won’t plunge to at least its mandatory retrace target of 1850 (especially if it can get through the orange triangle bottom overnight) and possibly 1750 at the bottom of the blue falling megaphone.

If ES tries to break out from the blue falling megaphone but ends up megaphoning across the breakout point instead, it’s a strong favorite to plunge down to a much lower low within a larger falling megaphone.

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