Yen Breaks Out Downwards From Big VWAP Triangle

The Yen has Broken Out Downwards from its Silver VWAP Triangle and Targets the Blue Megaphone Bottom

The Yen has Broken Out Downwards from its Silver VWAP Triangle and Targets the Blue Megaphone Bottom

The yen has broken out downwards from its triangle (silver) across VWAP of the megaphone (blue) it started forming in mid-November.

The target is now the blue megaphone bottom, but the existing guideline will almost certainly be redrawn. You could use a normal triangle target here–the height of the triangle subtracted from the breakout level.

It’s possible but not guaranteed that the yen could put in a false bottom at the level of the previous megaphone low. If you see the yen reentering the triangle, it’s going for that blue megaphone VWAP before reversing and continuing down.

ES has Turned Potential Price Channel into Falling Megaphone

ES has Killed its Blue Price Channel & is Likely Turning It Into a Falling Megaphone

ES has Killed its Blue Price Channel & is Likely Turning It Into a Falling Megaphone

ES has killed its potential falling price channel (bright blue on chart) and converted it into a falling megaphone.

This means that although we are likely to see a lower low for this move, the lower low will be fairly near the level of the existing low.

It also means that a number of longer-term potentially bearish scenarios have been replaced by bullish scenarios. Specifically, a pattern that could have been the start of a large correction has been replaced by a bottoming pattern characterized by excessive short-term bearishness.

That falling megaphone bottoming pattern strongly suggests ES will pierce the top of its 3-year price channel before a serious retrace into its body, and if ES can pierce the top of that channel, it is setting up a potential blow-off top.

SPY Put-Call Ratio Up

The SPY put-call ratio rose to 2.08 today on a modest rise in open interest.

That’s high in terms of the long-term average, and a little above the ratio’ 20dma, which has been steadily climbing since mid-January.

SPY put volume fell a little; SPY call volume fell a lot–by 47%.

Open interest is starting to get to the lower end of the normal range.

Triangle Means Short-Term Set-Ups are Coming (Updated)

ES has Formed a Triangle Between Pink Megaphone VWAP and Blue Price Channel Top

ES has Formed a Triangle Between Pink Megaphone VWAP and Blue Price Channel Top

ES has formed a triangle between its blue potential price channel top and its new pink megaphone VWAP. Bet with the breakout.

The key level on the upside is 2108. On the downside it’s the blue price channel bottom.

Update 10:28 a.m. Pacific Time: So the triangle broke out downwards but only to the pink megaphone bottom.  It then retraced to the pink megaphone VWAP and tried to break out downwards, but failed.

Now ES has just broken out upwards again through the pink megaphone VWAP and seems to be setting up a tiny Sornette bubble melt-up to the pink megaphone top and possibly through it to pierce the bright blue price channel.

Then there’s a mandatory retrace to the pink megaphone VWAP.

And at any point, ES can stop and spin an interior megaphone inside this little tiny nothing pink megaphone.

If ES gets seriously going through 2108 after getting there the right way, or if ES reaches the blue price channel bottom, pulls back, and then breaks out that bottom, that would be worth getting excited about.

Pre NFP Recap

ES is Stuck Inside a Number of Megaphones & will be Returning to Here Whether It Goes to a New High or 2050 First

ES is Stuck Inside a Number of Megaphones & will be Returning to Here Whether It Goes to a New High or 2050 First

Failure of a Potential Major Bearish Set-Up

ES failed to turn at the top of yesterday’s potential little silver price channel.  When that channel failed, it was the failure of a major potential bearish set-up.

Now ES has put in a little retrace from the top of a larger potential price channel (bright blue on chart) on incredibly low volume.  There is nothing real behind that turn.  That’s just the market-making bots jerking everybody around.

There’s a new little pink megaphone on the chart that I fully expect to kill that blue price channel.

There’s a collapsed SPY put-call ratio, but the open interest is so low that it’s unlikely to have a huge effect.

Megaphones

ES has essentially worked its way to a multi-megaphone VWAP area to wait for the NFP report.

The largest megaphones on the chart above go back to late January.  The second largest megaphone required a retrace to VWAP before it was legal for a breakout upwards.  It got that VWAP retest yesterday, and has bounced off of it.

That means the two largest megaphones in the chart above are now legal for a breakout upwards.  ES could just go up and keep moving, with the only required retraces being small ones for littler interior megaphones.

But ES could still complete the trip to the megaphone bottoms before returning to at least right around here. Then they could reverse here for a downward breakout, or more likely move up through this level to a new high.

Head and Shoulders

There’s an obvious complex head and shoulders on the chart.  But there’s no way it can break out like a real head and shoulders because of the megaphones on the chart.

The megaphones could possibly break out downwards, but only after stopping out everyone who tries to bet the head and shoulders breakout.

There are two things that make it highly likely that this head and shoulders is a fake and will be leading to a new high.  The first is all the interior megaphones on the chart above.  Real major head and shoulders tops aren’t filled with endless interior megaphones.  I’ll try to put together a post with lots of charts showing real head and shoulders patterns so you can see the difference.

In a real head and shoulders, there’s a strong plunge before the head.  That reflects sellers losing control–the market got away from them.

Then the head is a strong move up on strong bullish sentiment.  (If you don’t get that strong move up, there’s nobody to run over to create the proper collapse on the breakout through the neckline.)

The right shoulder tends to be either fast, with straight shots in both directions, or a triangle, with the moves inside the triangle getting faster as disciplined sellers get to a panic level.

This head and shoulders is instead comprised of literally dozens of megaphones inside other megaphones within larger containing megaphones.  Every interior megaphone has spun off other interior megaphones.  There is no reversal momentum at all behind this head and shoulders.  Megaphones inside megaphones inside megaphones don’t reflect major selling.  They reflect waiting.

The second thing that makes this head and shoulders likely a fake is its price channel context.

3-Year Price Channel

There’s an obvious 3-year price channel on the ES and SPY charts.  If ES breaks out downwards from the megaphones on the chart above, it will be heading for the channel bottom after an exact touch on the channel top on November 21.  The exact touch was not at the high, but that doesn’t matter.

It’s little-guy selling that turns prices on exact lines.  You don’t get important sell-offs on little-guy selling.

That price channel is in its critical decision wave.  Either ES pierces that channel top to set up a breakout into a steeper channel, or it is supposed to fail to reach that channel top to either start a topping pattern or set up a roll into a less steep channel.

I think ES will break that channel top, and then we’ll see.

Potential Short-Term Set-Ups

If the blue price channel top actually holds here, and ES puts in a new low within that channel, there would be two potential set-ups.

A partial retrace into the channel from the bottom that then breaks out downwards would be a set-up to short into a possible melt-down.

If instead the blue price channel puts in a lower low, and then breaks out the top, you’d expect a classic E-waver Fibonacci retrace off the move from the high to the channel low.  Then you’d expect a hard fast C wave down.

Another set-up is the green scenario in the chart above.  If ES destroys the blue price channel here with a move through the top, then reenters the channel, it’s a set-up to bet to a lower low and probably a set of lower lows.

If instead ES gets moving up through 2108, it’s headed for a megaphone top.  I’ll post targets if it happens.

SPY Put-Call Ratio Collapses

The SPY Put-Call Ratio Collapsed to 1.29 Today

The SPY Put-Call Ratio Collapsed to 1.29 Today

The SPY put-call ratio collapsed to 1.29 today, just a little above its bottom Bollinger Band.

SPY put volume fell by 15% on a modest increase in open interest. SPY call volume increased by 44%.

This kind of drop in the ratio would tend to be bearish for prices, although outside of opex week the effect isn’t always immediate.

Potential Mini Sornette Bubble Set-Up

Potential Sornette Mini Bubble Set-Up

Potential Sornette Mini Bubble Set-Up

A few minutes ago I posted potential set-ups for an immediate lower low and the implications of a lower low based on where ES reverses. But I also said in that post that we may not see a lower low.

If we’re not going to see a lower low, there’s a good chance we’ll see a mini Sornette bubble set-up (chart above).

You bet on the breakout from the first or second bobble. Sometimes the second bobble is extremely small.

Basically the bobbles represent the price breaking out through a critical megaphone VWAP area.

Price Channel vs Falling Megaphone

Price Channel (Silver) vs Falling Megaphone (Orange) Scenarios

Price Channel (Silver) vs Falling Megaphone (Orange) Scenarios

First, it’s not mandatory that ES put in a lower low for this move. It usually would, but it’s not required. It could just go blasting up to a new high.

If it goes for the lower low, as is likely, it could do it from the top of the potential silver price channel on the chart, or it could break through that top and do it from the top of the orange falling megaphone.

If ES reverses at the silver price channel top, the lower low would usually be followed by a breakout upwards, but the upwards breakout would usually not take the price to a new high. In this case, we’d usually see a retrace to the middle of this sideways mess (an E-waver’s B wave) then a hard fast wave down (an E-waver’s C wave).

If ES reverses at the top of the orange falling megaphone, it’s more likely that after a lower low and breakout upwards that we’ll see a new all-time high.

Either a straight upwards move from here or the purple scenario are the most likely at the moment.  I’m flat until I see either a lower low or another set-up to go long again.