ES has confirmed a new rising megaphone (blue) on its 60-minute chart with a quick spurt to a new high overnight.
Now we need a topping pattern on the rising megaphone to set up a short position.
ES could put in a quick spurt to a significantly higher high, complete the spurt with a head and shoulders top inside the rising megaphone, and then break out into a melt-down (green scenario).
Or it can break out of the blue rising megaphone a lot lower, without having completed a head and shoulders top (purple scenario). That would usually we going to see more sideways price action to form a megaphone top.
Either scenario could eat up a lot more time than the scenarios I’ve drawn on the chart. For example, the market could throw in interior megaphones or triangles in the purple scenario, or a series of prolonged sideways moves within the green scenario, connected by quick spurts up.
Get ready for a prolonged sideways move on the daily and weekly charts. ES is likely topping for a move to the bottom of its longer-term trading range.