ES is at its Blue Megaphone VWAP – It Can Break Out Through It for the Megaphone Top, or Turn Down for Another Tag of the Bottom
ES climbed overnight to its blue megaphone VWAP. The blue megaphone is a third wave bottoming megaphone within the big red bottoming megaphone.
Interior bottoming megaphones often make you redraw the sides of their parent megaphones a couple of times, so I wouldn’t be surprised to see ES put in one final lower low here to make us redraw the red megaphone bottom again.
Plus, next week is opex week, and the Friday before opex week will often put in one final fake-out move to get everyone positioned wrong before the real opex week direction starts.
Plus the purple scenario would put a proper inverse H&S bottom on this week’s falling megaphone from the February 1 high.
ES has already put a legal bottoming pattern on the chart for a move to the blue megaphone top, so odds of the green scenario would usually be roughly a coin flip.
Oil has Broken Out of its Falling Megaphone
However, oil has broken out of a falling megaphone bottoming pattern after megaphoning furiously yesterday at the bottom of the head of an inverse head and shoulders for the falling megaphone. Oil is also legal for a breakout from that bottoming megaphone.
So oil is a favorite to continue up to 29.25 before pulling back into the right shoulder of its inverse H&S, and then breaking out of it to past the January 28 high. That ought to help push up the market.
Oil has Broken Out of its Orange Falling Megaphone
If oil quickly reenters its orange falling megaphone, it will put in a wave to one final lower low to complete a larger head on its inverse H&S and we’ll likely see the purple scenario for ES.