SPY Put-Call Ratio

The SPY put-call ratio is at 2.16.  That’s high, but not high enough to be much of an indicator outside of opex week.  The ratio’s 20 dma is at 1.80.

SPY put volume today was almost unchanged from last Wednesday.  The ratio rose on a drop in call volume.

Now that the selling from the CME margin increase is over, the CPCI fell sharply.  It’s now at its 20 dma at 1.12.

SPX End of Day

Weird ES Bottoming Megaphone

Weird ES Bottoming Megaphone

ES could dip here to 1967.50 (SPY 197.25) or as far as 1965 (SPY 197.00) and be legal for an upward breakout from a bottoming megaphone (purple scenario).

But this megaphone is one of those oddly shaped ones that looks as if it wouldn’t mind moving sideways a bit longer.  Plus the low is just kind of hanging there between two critical VWAP levels at ES 1967.50 and 1952.50.

It could all be an artifact of the CME raising margin requirements last Thursday, but  I wouldn’t be surprised to see this megaphone redraw itself with another wave down to 1952.50, then up to the 1978.75 area, then down to roughly 1967.50 again, then up up and away to a final new all-time high before a significant correction.

It’s probably 60-40 in favor of the green scenario.  However, there’s now no question that a megaphone is forming, and that greatly increases the odds of the new all-time high. See today’s earlier post for details.

ES & SPY May Commit Shortly to New All-Time High in Last Move Up Before Significant Correction (Updated)

The Loose Megaphone in the Potential Right Shoulder Area of the Head of a Larger H&S Means Higher High is Likely

The Loose Megaphone in the Potential Right Shoulder Area of the Head of a Larger H&S Means Higher High is Likely

If ES passes the overnight/morning high, the green scenario on the chart above is an overwhelming favorite.  If ES can’t take out that high, and instead heads down to 1938, I’ll be quickly posting a simpler topping chart.

But it is highly likely that a loose megaphone is forming at the potential right shoulder area of a head-and-shoulders head on a larger head and shoulders.

When you see a megaphone forming in the right shoulder area of an H&S, the price is almost always going to go to a higher high.  That higher high would be the real head of the larger head and shoulders, and would most likely be the top before a significant correction.

Update:  If ES is going to fail to take out the overnight/morning high, it should happen at roughly ES 1971-1971.50/SPY 197.60-197.65.  But you have to be careful, because a turn there could just be a double dip to retest the megaphone bottom.

A turn there could also stop at a retest of the VWAP of an interior megaphone at roughly ES 1965/SPY 197.  In other words, there’s a good chance the market will keep this tricky for a bit.

Hard to Describe in Words, So Here's A Chart

Hard to Describe in Words, So Here’s A Chart

Oil is Legal for Downward Breakout From Head and Shoulders

Oil is Legal for a Downward Breakout from H&S Right Shoulder Top

Oil is Legal for a Downward Breakout from H&S Right Shoulder Top

Oil has formed a megaphone (orange) at its head and shoulders right shoulder top, and now that orange megaphone is legal for a downward breakout.  A downward breakout would imply a downward breakout from the head and shoulders as well.

But oil could also just do a double tag of the bottom of the orange megaphone, then reverse to complete a bottoming megaphone and put in another move to the orange megaphone top.

ES Bottoming Within Megaphone for One Last Move Up (Updated 2x)

ES is Forming a Bottoming Megaphone for One Last Wave Up within its Orange Megaphone

ES is Forming a Bottoming Megaphone for One Last Wave Up

ES is forming a bottoming megaphone within its orange megaphone for one last wave up before a significant correction.

This wave up could end at the orange megaphone VWAP at roughly ES 1978/SPY 198.30, or with a topping formation in the ES 1990-2000/SPY 199.50-200.50 area.

Or this price move could go further.  ES is legal for an upward breakout from the purple bottoming megaphones on the chart, and the top of the orange megaphone is still unclear.  That means it could go all the way to the top of its larger topping megaphones in the ES 2020-2030 area.

Update, 6.55 a.m. Pacific Time:  So far this still looks to me like a bottoming megaphone before one last wave up, with the downward pressure coming mainly from forced selling due to the CME raising margin requirements last Thursday.  This ought to be the last of it.

The megaphone is forming across two larger megaphone VWAPs.

Update 2:  The price may form a small megaphone down here, but if it takes out this morning’s low and doesn’t immediately recross it in forming a megaphone, it’s going for at least ES 1952.50 and possibly 1938ish.  But after that it will have to retrace to ES 1971/SPY 197.60 before it can go lower.

More SPX Topping Tells – Extended Megaphones

ES Extended Megaphone

ES Extended Megaphone

If you’re an Elliott waver, you’re familiar with the concept of extended waves.  An ending diagonal, for example, can just keep subdividing what should be its final wave up in the formation until it fills in the very tip of the pattern.

Megaphones do something similar.  Often at an important top, you see a megaphone that forms an interior topping megaphone.  Then that interior topping megaphone itself forms an interior topping megaphone.  Then that interior topping megaphone spins yet another interior topping megaphone.  The interior megaphones get smaller and smaller until finally they start breaking out downwards to the bottom of the first megaphone.

In the ES chart above, there’s a gray megaphone that started forming in early June.  Within that megaphone there’s a red topping megaphone that started June 18.  Within the red topping megaphone there’s a navy blue topping megaphone that started forming in early July.  Within the navy blue megaphone there’s an orange topping megaphone that started forming July 22.

There are other megaphones within these megaphones, but for now they don’t matter.

The point is this thing is extended about as far as it can get, and it’s about to head into a fairly predictable series of plunges and retraces.

ES Megaphone Scenarios

ES Megaphone Scenarios

Continue reading

SPY FOMC Bobble Likely to be Followed by Fast Move Down

SPY Megaphone Top Scenario

SPY Megaphone Top Scenario

SPY is doing the same type of Fed bobble it did around the FOMC meetings in January and March.  Note that the bobbles around the April and June Fed meetings were similar but avoided the plunge to the rising wedge bottom.

When I clean up the SPY daily chart, pretty much the only scenario that makes sense is the green one on the chart above.  That would be a move up early next week, and then the move down would start.

Here are the reasons.  Continue reading

Oil Megaphone Seems Key to SPX

Oil has Formed a Megaphone (Orange) Across VWAP of its Larger Megaphone

Oil has Formed a Megaphone (Orange) Across VWAP of its Larger Megaphone

Oil has formed a megaphone (orange)  that looks a lot like recent moves in ES.

The orange megaphone has formed across VWAP of a larger megaphone.  It has just retraced to its VWAP and is legal for a downward breakout.

A downward breakout would target the larger megaphone’s bottom at roughly 97.50.  That would also put a head and shoulders on the chart.  A breakout through that level would be a breakout through the H&S neckline, with a potential downward breakout from there that would target 90.

Or oil could make another trip to the top of its orange megaphone and then retrace to VWAP again.

Oil Head and Shoulders on Daily Chart

Oil Head and Shoulders on Daily Chart