So we continue to have a consolidation between ES 1955 and ES 1980, where no consolidation was needed. ES was all set up to run to the top of its orange megaphone and make a new high, killing the head and shoulders on the chart.
It was also legal for a downward breakout from the orange megaphone for a plunge to the bottom of a larger megaphone at roughly 1850.
But instead it seems to be forming a triangle here (navy blue on chart).
If the triangle actually completes, it will likely break out downwards. Triangles in a head and shoulders right shoulder position are usually bearish.
But if the triangle breaks out before completing, it’s probably forming either an inverse head and shoulders (if the premature breakout is downwards) or a head and shoulders (if the premature breakout is upwards).
I’d short any breakout through ES 1955/SPY 196 because of the potential for a melt-down to ES 1850 or even a bit lower. And I’d go long on any breakout through ES 1980/SPY 198.50 because of the potential for a melt-up to a new all-time high.
But any breakout from an incomplete triangle would have high odds of running out of steam well below the target.
For a premature breakout upwards, there could be trouble in the ES 1988-1991.25 area. For a premature breakout downwards, the bottom of the 2-year+ rising wedge in the ES 1940ish/SPY 195ish area is an obvious major hurtle to get through.