Watching the Megaphone

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That was a nice break down yesterday, though I’d note that the bears still haven’t managed to put a full day together in this downtrend so far. I’d also note that the falling megaphone from the high is still not yet broken. While that remains intact there is a significant probability that we will see a retest of the highs, though it is also possible that this megaphone may just expand into the 2023 fib retrace target and then break up afterwards.

In the short term we are seeing a bounce off megaphone support and if that continues the obvious next target is megaphone resistance, currently close to the 50 hour MA in the 2094 area. That would be the first target on a rally from here. If the megaphone was to break up then the target would be a retest of the 2116 high. and that would be very likely to be the second high of a double top targeting that 38.2% fib retrace target at 2023. SPX 60min chart:

151110 SPX 60min Wedge and Megaphone

Could this retracement be finished? The daily chart says no. The high probability daily RSI5_NYMO sell signal is nowhere near target, but the signal would allow a retest of the 2116 high before going down further. SPX daily chart:

151110 SPX Daily Rising Wedge Fib Targets

The scenario I’m leaning towards today is a move to test megaphone resistance in the 2090-5 area. If we see an AM high that fails hard though, then the megaphone could break down (the 30% option) with a target close to that 38.2% fib retrace.

The 2020 area is an important inflection point area that should be tested here. If ES bounces hard there then I would have double bottom targets in the 2134 and 2170 areas. A break down there would open up a test of strong 1950-60 support and a possible full retracement of the rising wedge back to 1871.