Today’s Price Action was Most Likely a B Wave (Connecting Wave) Before Another Move Down
ES has a topping triangle (navy blue) on its chart at the top of last week’s weird Neely rising wedge. It’s already broken out downwards from that triangle to VWAP of a larger topping megaphone (bright blue). From there it bounced into what looks to me like a B wave (or connecting wave) before a fast move to the bright blue megaphone bottom.
That megaphone bottom will probably redraw itself on this drop so that it will be less steep.
The B wave is both a megaphone and an abc into a head and shoulders. The head and shoulders has broken out through its neckline after hours. The market could still throw some curves, but it’s a good bet the move off last Monday’s low has topped and is started into a move down to take out that low.
If you’re already short, I’d just hang on until the price takes out last Monday’s low. (If something changes, I’ll post it.) Last Monday’s NYMO close below -100 is such a strong set-up for a short to a lower low that you really don’t want to bet against it unless an actual set-up shows up to cancel it, which I doubt.
If you’re not short yet and you want to play this move, I’d short from a breakout downwards from a topping formation at either the pink or blue megaphone VWAP after a bounce to that VWAP from the megaphone bottom.
Otherwise, if you’re waiting for a set-up to go long, I’d wait for ES and SPDR S&P 500 (NYSE:SPY) to take out last Monday’s low. There will be multiple set-ups down there to get long, including a genuine upwards breakout through the level of that low after a lower low. The upwards target will depend on how big of a drop the price makes from the neckline of the H&S on the daily chart.