SPY is in the Critical Decision Wave of the Red Price Channel. In This Case, It Means It will soon Start a Top Before a Dip.
The ES and SPY opted for the breakout scenario discussed yesterday, which was a strong favorite. That confirmed a rising megaphone top on ES. It would usually put in the dip for the left shoulder of a head and shoulders top for the new formation soon, before a strong move up into the head of the H&S.
SPY has confirmed a price channel (red) instead of a rising megaphone top, but price channels that start late in a move are almost always topping patterns. That means SPY is about to start a topping pattern within the price channel too.
ES and SPY must then retrace to at least the orange megaphone VWAP and they are likely to break through VWAP enough to break the bottom of the bright blue rising megaphone a bit.
Because it’s too late for ES and SPY to complete a proper H&S within the bright blue rising megaphone, they’re a strong favorite to move up to a new high after that break. That will confirm the larger navy blue rising megaphone on the chart.
ES and SPY could move many hundreds of points higher in completing that navy rising megaphone. The green scenario represents roughly the minimum price gain we’re likely to see. There are many ways ES and SPY could extend that move.