ES Inverse Head & Shoulders Update: Let's notice that the overnight weakness pressed ES to a new near term pullback low at 2682.00. If recent weakness off of the 11/7 high at 2818 into today's low at 2682.00 represents the inside portion of a RIGHT SHOULDER of the larger IHS pattern, then the Right Shoulder low is 30 points and 1.2% beneath the LEFT SHOULDER LOW of 2712.25.
Usually, symmetry (depth) between shoulders is important in these patterns. The deeper Right Shoulder is a warning to us that the symmetry is off a bit and for that reason, the bullish efficacy of the larger pattern diminishes somewhat, but not totally.
To gain more confidence that the IHS pattern will work despite the lack of shoulder symmetry, ES needs to claw its way above 2723.50 for starters, which will improve the prospect of an emergent Right Shoulder within the larger potential basing formation.
That said, in the absence of what I consider to be minimum strength to imbue the IHS pattern with more confidence, ES is vulnerable to downside continuation, possibly ACUTE WEAKNESS if and when the perception of an IHS failure takes hold.
My sense is that only a very positive headline story or event (such as a China deal or a Fed Head intimating that an interest rate pause is warranted) will create enough upside combustion to thrust ES higher into a more developed Right Shoulder formation.
For anyone who wants to play the IHS potential, you might consider throwing some money at the SPY Dec. out of the money 280 Calls (last 1.73). Keep in mind, this should be considered a lottery ticket for the IHS and year end rally, inspired by anticipated good news on "something." ... Last in SPY is 268.71