How does a weaker dollar impact gold and Bitcoin?
1. Even if ES is forming the triangle (pink) shown on the chart above, it should cross the red trend line to do it.
2. Nothing on the chart requires ES to form a triangle here. There is already a complete topping formation on the chart for a plunge to the bottom of the 3-year price channel. Here is the complete topping formation:
The orange topping megaphone is a well established megaphone. The swing up from the most recent touch on the megaphone bottom failed to make a new megaphone high.
Instead, ES formed a head and shoulders with a neckline at the megaphone VWAP, then broke out downwards through the neckline.
This megaphone should break out the bottom.
4. ES confirmed a price channel (navy blue on chart) on this move down and has broken out downwards from the price channel. ES could start a bottoming formation here for the channeled move, but what it would usually do is tag the bottom of the navy blue price channel and then continue the channeled move down.
ES could have easily broken the top of the navy blue channel to set up a self-limiting swoosh down within a falling megaphone. But it didn’t do it. That’s bearish.
5. All of this is occurring within the context of a megaphone going back to last summer (red on chart below) and a 3-year price channel (bright blue on chart below) for which ES failed to pierce the top on several tries as it topped on the rally from the last trip to the channel bottom.
That means ES should be targeting at least the channel bottom.
Also, ES has been crisscrossing the top of the red megaphone since December. The red megaphone was legal for an upward breakout, but instead the price twined up the top. That means you’d usually see a retrace to at least the megaphone VWAP at roughly 1900.
There are other major megaphone VWAPs at roughly ES 2040 and ES 2000. We could easily see some kind of megaphoning or bouncing at those levels. And if ES is going to make any serious play at completing a triangle, it should come from roughly 2040.
But I doubt those levels will stop this move because the orange megaphone bottom is already almost at 2000 and we should see a downward breakout through that.
After that, there would usually be resistance at the usual previous lows, but nothing strong enough to save ES from the enormous suction of the VWAP at the 1900 level.