Yen Retest of Megaphone VWAP From Below Clears the Decks for a Plunge

Yen Retested VWAP From Below and Closed Beneath It

Yen Retested VWAP From Below and Closed Under

Yen futures retested their megaphone VWAP from below and unlike last time closed beneath it. That is a set-up to short if you’re not short already.

The yen is all clear now not only for a trip to the megaphone bottom, but also for a breakout through the megaphone bottom.

SPY Ascending Megaphone Breakout Should Lead to Spike

SPY Ascending Megaphone Breakout

SPY Ascending Megaphone Breakout

You often see two false breakouts from rising or falling wedges (including rising or falling megaphones) before the real breakout.

SPY had two false breakouts from its rising megaphone (orange lines on the chart) before its third breakout on October 22. Now the price needs to retest the top of the rising megaphone. It could also do something like form a triangle across the top. But this dip hasn’t reached the top yet. See close-up below.

Close-up of SPY Breakout Through Ascending Megaphone Top

Close-up of SPY Breakout Through Ascending Megaphone Top

I’ve mentioned before that in order to complete, the orange rising megaphone needs a substantial spike through the top. It should look something like the one that completed gold’s rising megaphone.

Gold's Rising Megaphone Completed with a Spike

Gold’s Rising Megaphone Completed with a Spike

Since this is the third breakout for SPY, this one would usually lead into the spike.

 

Dollar Reaches Megaphone VWAP

DX Reaches Area of Orange Megaphone VWAP

DX Reaches Area of Orange Megaphone VWAP

The DX has reached the area of its orange megaphone VWAP. It can either turn here and break out the bottom of the megaphone, or it can break out upwards through VWAP heading to the megaphone top. We should then see a retest of VWAP before a breakout through the top of the orange megaphone.

The upward breakouts are more likely but not guaranteed.

Gold Double Probed Wedge Top, Then Reversed

Gold Probed Its Wedge Top Twice This Week

Gold Probed Its Wedge Top Twice This Week and Reversed

Gold probed its wedge top twice this week and reversed. It has reached roughly the area of its short-term falling wedge target (first touch on the top of the wedge), and seems to be making some kind of H&S or rounded top.

Gold Potential Rounded Top

Gold Potential Rounded Top

A breakout downward through the neckline puts gold into its final major wave down of the correction that started in August 2011.

Gold Long-Term Chart

Gold Long-Term Chart

Gold will likely consolidate for a bit between the current price level and the bottom after that.

With today’s FOMC excision of its language on tightened conditions, and the recent spate of overnight reverse repos, the Fed seems to be taking care to keep long-term real rates higher than before to discourage commodity speculation.

 

 

SPY Price Channel Retest

SPY Retest Its Price Channel Today

SPY Retested Its Price Channel Today

SPY retested its price channel today after the FOMC announcement. No taper, but the Fed edited out language about tightened conditions. The 10-year took it hard.

SPY could continue melting up from here, or go into a deeper retrace into the channel (see mini-H&S scenario on the chart).

Any retrace here should not make it to the bottom of the old price channel. A retrace roughly half way into the channel would be about right. If the retrace is any deeper, the new price channel (drawn by traditional rules, as provided in John Murphy’s Technical Analysis of the Financial Markets) won’t be steep enough to finish off long-term formations like the rising wedge in a timely way.

SPY Should Drive Pretty Quickly to the Top of its Rising Wedge (Navy Blue)

SPY Should Drive Pretty Quickly to the Top of its Rising Wedge (Navy Blue)

Also, a Sornette bubble would make a smaller retrace than the last one at this point.

So if the price should retrace all the way to the bottom of the channel and break out downward, it’s important. It would indicate the start of a topping formation.