Oil has Retraced to Very Long-Term Megaphone VWAP – Either Bottoms Here or Kaboom

Oil has Retraced to VWAP of 9-Year+ Megaphone

Oil has Retraced to VWAP of 9-Year+ Megaphone

Oil has retraced roughly to VWAP of a 9-year megaphone (bright blue on chart). The original VWAP is closer to 60—it would usually go all the way to there, but typically it would be in the context of forming a bottom, starting here.

What would usually happen is that oil would now form an interior megaphone across the VWAP area.  As you see the interior megaphone start to take shape with small waves, you can start playing the bigger waves.

If oil should somehow get through this VWAP area without a fight, the chart calls for $10ish. That’s very hard to believe, but would certainly be interesting.

 

Euro Long-Term Formation Sure Looks Like Gold’s Big Top

The Euro's Sideways Move Since High Looks a Lot Like Gold's Big Top (Below)

The Euro’s Sideways Move Since High Looks a Lot Like Gold’s Big Top (Below)

In case anyone hasn’t noticed, euro futures are putting in a classic long-term topping formation. The euro needs to break out downwards to confirm, of course.

It’s very similar to gold’s big top (below).

Gold Put In a Similar Top

Gold Put In a Similar Top

Lots of currency charts are suggesting a big move is coming.

SPY Price Channel Set-Ups

SPY is Moving Sideways Near Top of 3-Year Price Channel Top

SPY is Moving Sideways Near Top of 3-Year Price Channel Top

SPY is moving sideways after an exact touch on the top of its 3-year price channel (red on chart above).  The exact touch on the channel top virtually guarantees a significantly higher high to come.

SPY is also moving sideways within a smaller price channel (navy blue in chart below). That virtually guarantees a higher high to come.

A Sideways Move at This Point in the Navy Blue Channel Virtually Guarantees a Strong Move Up Back to at Least the Channel Top

A Sideways Move at This Point in the Navy Blue Channel Virtually Guarantees a Strong Move Up Back to at Least the Channel Top

Whether the sideways move turns on the navy blue channel bottom or breaks through it before turning, the next move would almost always be a strong wave up to at least the channel top.

The SPY put-call ratio had gotten down to 1.17 on Tuesday night.  On Wednesday night some of that bullishness had gotten worked off, and the ratio had risen to 1.31.  If the ratio continues up a bit today, it makes for a beautiful set-up to get long short-term near the navy channel bottom.  Your stop should definitely not be exactly at the channel bottom, however, because about half the time there’d be some amount of breakout through that bottom here.

IWM Upcoming Targets

IWM Megaphone Most Likely Scenario

IWM Megaphone Most Likely Scenario

IWM put in the max number of alternating touches on the side of a price channel that rolled up into a steeper price channel. Then it broke out into the sideways move required by those price channels—a megaphone (navy blue on chart).

It has put in a 5th wave false top within this megaphone (the November 21st high that retraced to the megaphone VWAP). That means it would almost always break out of the megaphone top on this wave to put in a topping pattern up there.

Then the price would almost always return to the navy megaphone bottom before a retrace to the megaphone VWAP to decide on longer-term direction.

The navy blue megaphone bottom will be at roughly the VWAP of the entire sideways move of 2014 by the time the price gets there, so a downward breakout from the navy blue megaphone would imply a move down to at least the bottom of this year’s trading range.

Nothing But Churn with the SPY Put-Call Ratio Extremely Low

The Gray Megaphone is Spinning Off the Navy Blue Megaphone

The Gray Megaphone is Spinning Off the Navy Blue Megaphone

The market’s doing nothing except churning across ES 2067.75. The gray megaphone of the past couple of days has now spun off an interior megaphone (navy blue on chart) across its VWAP.

The navy blue megaphone could spin off another interior megaphone across VWAP of its own.

This is a classic way of just keeping the price moving sideways. Sometimes the megaphones within megaphones will form a block, sometimes a triangle.

The yen spent months in this kind of megaphone-in-megaphone before collapsing.

The SPY put-call ratio last night was 1.17. That’s very low and bearish, but since we’re not in opex week, the effect doesn’t have to be immediate. And the ratio could get more extreme before we see an effect.

SPY Trying to Break Out of Price Channel

SPY is Trying to Break Out of its 3-Year Price Channel (Red) without a Pullback

SPY is Trying to Break Out of its 3-Year Price Channel (Red) without a Pullback

SPY is in holiday upward drift and trying to break out of its 3-year price channel (red on chart) without a pullback into the channel.

A price that drifts out of a channel this size without a decent pullback does not have far to go.

I expect SPY to drift across the top of its channel and then continue drifting up, clinging to the channel top as it forms some kind of topping pattern.

Because of seasonal bullish factors, I expect that topping formation will be a rising megaphone formation, with everyone talking about how strong the market looks when the wedge enters its final and largest wave up.

Oil Megaphone vs Falling Megaphone Bottom

Oil Megaphone vs Falling Megaphone Scenarios

Oil Megaphone vs Falling Megaphone Scenarios

Oil is megaphoning at the VWAP of its potential bright blue megaphone. If OPEC cuts this week, that little VWAP megaphone will break out upwards and we’ll be in the green scenario.

If OPEC doesn’t cut, the price will plunge again from here and put a falling megaphone formation on the chart.

Either way, oil is bottoming and we’re about to get a nice move in one direction or the other.