A VWAP Close to Thanksgiving Week

A VWAP Close to Thanksgiving Week

A VWAP Close to Thanksgiving Week

Thanksgiving week closed with a plunge to the short-term megaphone VWAP. From here the SPX could either form a stop-eating internal megaphone across VWAP, reverse and break out the top of the current megaphone (orange on the chart), or plunge through VWAP to the bottom of the megaphone, which will intersect with VWAP of a larger megaphone at roughly 1790.

A plunge through VWAP would also be a plunge through the bottom of a rising wedge (silver on chart below). Elegant.

ES Rising Wedge (Silver)

ES Rising Wedge (Silver)

If 1790 breaks, it’s down to the bottom of a still larger megaphone, which intersects with an even larger megaphone VWAP at roughly 1760. If 1760 breaks, we’ll still see a higher high, but a serious top has started forming.

Note that the standard target for the upward breakout of the SPX May-October rising wedge is a little over 1900.

Rising Wedge Upward Breakout Target is Over 1900

Rising Wedge Upward Breakout Target is Over 1900

Oil Stopped by Megaphone VWAP

Oil Stopped by Megaphone VWAP

Oil Stopped by Megaphone VWAP

Oil has put in a textbook short-term megaphone. Notice the breakout and how today’s price jump got stopped by the megaphone VWAP.

A breakout downward from the megaphone past the recent low would be a very strong set-up to resume long-term short positions. But wait for the breakout, because the dollar has not reached its short-term megaphone bottom target yet and probably won’t until closer to the nonfarm payroll report. That means oil could form an internal megaphone across its VWAP area before a downward (or upward) breakout.

Dow 1929 vs. Now

Dow 1929 vs. Now

Dow 1929 vs. Now

This chart is from Tom DeMark via Tom McClellan. It points to the same potential crash time frame as the Sornette bubble formation and Tyler Durden world GDP model.

The timing and pre-crash gain also fit the long-term formations on the SPY chart.

But no need to over-anticipate. There will be a set-up when the time is right.

Also, keep in mind that 40% of Sornette bubbles fail to crash when they’re supposed to. Instead, the market puts in some kind of lesser sideways correction and then resumes rising.

SPY is at the Top of Its 2+-Year Rising Wedge and 2004-2006 Price Channel

SPY is at Top of Rising Wedge (Navy Blue) and 2004-2006 Price Channel (Pink)

SPY is at Top of Rising Wedge (Navy Blue) and 2004-2006 Price Channel (Pink)

SPY is at the top of its 2+-year rising wedge (navy blue on chart) and 2004-2006 price channel (pink). No major price move can end precisely on the side of a wedge or price channel, so a higher high is virtually certain.

SPY could, however, move to the bottom of the price channel and rising wedge before the new high. For example, you could see SPY continue to creep up the top of the price channel until the non-farm payroll report on December 6. If the report were to spook the market, you could see that much of a correction.

The ES megaphone VWAP area at roughly 1790 remains key, and actually the VWAP for that megaphone has moved up in the last day or two to the 1801-1804 area.

ES Megaphones

ES Short-Term Megaphones

People who want to play it real tight could put a stop at 1801 or even short at a downward breakout there. If you’re stopped out at 1801, you’d get long again on either a breakout to a new high or a new set-up at the bottom of the correction.

The price could also just melt up through the top of the channel and wedge, and continue melting up for weeks or months.