ES Megaphone Pattern

As you may have noticed, the market has gotten somewhat, shall we say, wild. This broadening pattern (or megaphone) on the daily chart of the futures is the cause (click chart to enlarge):

ES Broadening Pattern

This is considered a topping pattern, however these things can also turn out to behave like bull-flags.

In other words, be careful out there. The market appears to be winding up for a big move. One of those red lines will be tagged soon.

Note: the SPX has a similar pattern, but the one on the ES is better defined. The SPX isn’t open overnight, so it can only have a delayed reaction to events that occur when it is not open. So, I like using the ES chart better.

25 thoughts on “ES Megaphone Pattern

  1. thanks Julie.
    I think its the american food. less bacteria to keep us “healthy” make us more vulnerable. i wont get started. 😛

    i used to eat raw chicken eggs right as they came from the chicken. no problem. here even farm fresh they make you be afraid to eat raw. thats just one strike and yes you can link me to 1k research papers that might prove that its bad.

    And Matt, I also think we will go to 1125 before going down. i have mentioned a few times and it could be tomorrow or by end of month window dressing.

  2. in other notes.
    from wednesday’s big drop to tonight this is perfect cup and handle.
    if we hit 1099 in futures then drop to 1085 or something and move up towards 1099 again… well 1125 isnt very far fetched. this is all /ES (futures) because I too love it better. here we go. i’ll draw the cup and the handle on my graph (hourly chart)

  3. K,
    Grandfather loves raw eggs. But Mother, Paula
    and I like our eggs over easy…eyes bloused.

    Stocktiming shows the big boys increasing
    their selling. Number of negative divergences
    is building. Question is…how long can Treasury
    continue to pump up the market. They were
    pushing the program trading button today.
    When will foreign selling take over?

  4. K,

    That “there’ a rep for that” is funny. I see where Verizon has a TV ad that says “there’s a map for that” dissing ATT’s bad reception.

  5. K,
    I don’t think he has an Australian source yet. Before
    he left for Australia, he bought eggs from a
    friend’s farm. His friend let his chickens roam…
    ate grass.

  6. no need for a source there. I think usd/jpy will be good short. going to put a tight stop though with my 400x margin

  7. George,

    The downtrend line on your chart, and the 50% fib, converge in the same general area as SPY’s October 6, 2008 gap. Those three elements of resistance are what has caused the volatile broadening pattern. And the volatility tells us that the market is at an important crossroads here.


  8. K,
    Have to go and get ready for my day job.
    Mother’s friends will be back before I know
    Good trading…make a ton.

  9. Matt, I think you’re right… important crossroad. I’ll be ready either way it wants to go. I’m figuring it will be a surge up to and perhaps over the 50MA then reverse back down.

    I’ve also been thinking that if there is no news worse than it is that we could range for quite a while. After all, we haven’t gone anywhere for a month.

  10. George, yes, I see a 38.2 Fib line just north of 101 and your trendline. It gets so muddled in the whipsaw of today with the MAs, I wasn’t sure what you were trying to point out. I believe you are identifying an intermediate downside target of 1015ish based upon the 38.2 Fib once the market breaks down?

    Matt, given the Q’s partial H&S pattern…and a possible retest of the SPX 1100 level on Friday…what is the thought behind a TRIPLE top that is more flat at 1100? A H&S pattern that has no head? Just a channel that will bounce around until it finally breaks support or resistance?

    That pattern may also indicate a cup with handle, but there are volume and slope issues that haven’t been discussed to validate that chart pattern. If the handle slopes upward, or the volume isn’t drying up in the handle, IBD will warn you to be suspicious of the breakout.

    Scotty, I think some of us will be “betting” on an 1100+ S&P as day traders, followed by some nimble trading to reverse course when this market decides to break down. Hope you catch the wave too.

    I’ll be interested to see what IBD’s Market Pulse says Friday AM since they changed it to Market Under Pressure again from Confirmed Uptrend this morning prior to the 11+ SPX run today.

    I’m off to bed as well—hope to catch some of you tomorrow for a trading day. Enjoy the scalps George.

    String is having surgery on Friday, right? Say a prayer!

  11. futures copied and pasted @ 5:30 am, no change on s&p, nas up 1.75
    yawn, would rather be sleepin’

    Market Last Change %
    Crude Oil 81.33 +0.14 +0.17
    Natural Gas 5.677 +0.06 +1.06
    Corn 403.5 +5.25 +1.30
    Soybeans 1007.00 -2.75 -0.27
    30yr Bond 119.25 -0.375 -0.31
    10yr Note 117.96875 -0.046875 -0.04
    NY Gold 1060.6 +2.0 +0.19
    NY Silver 17.71 +0.165 +0.93
    Emini S&P 1090.75 0.00 0.00
    Emini Nasdaq 1764.25 +1.75 +0.10
    Emini Dow 10033 -5 -0.05

  12. 2thfixr,

    I’m zeroing in on the 50% fib as an upside target since that is near the trendline. I’m not sure where a retracement target would go but the 38% fib looks reasonable.

    If this is a bull market or not, “something” will happen at the 50% retracement. I do expect a pull back at that point to some degree. I’m keeping up with the longer-term trends because of another account I am managing.

    I have my daughter’s 401K in the market for long-term since the turn. I will rotate it back out at some point, most likely when a longer indicator, say the weekly, turns. I’m not trying to pick bottoms and tops with that account, merely getting the “goodie” from the longer-term moves.

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