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.

 

 

Yen Futures Are Closing In On Megaphone Bottom Before Retrace

Yen Futures Are Closing in on Navy Blue Megaphone Bottom on 30- and 60-Minute Charts

Yen Futures Are Closing in on Navy Blue Megaphone Bottom on 30- and 60-Minute Charts

Yen futures are closing in on their Oct./Nov. megaphone bottom (navy blue) on their 30- and 60-minute charts.

After reaching the bottom, and possibly spiking through the bottom, odds are very high that they will retrace to the navy megaphone VWAP at roughly 1.02 on the December futures contract.

After that, the yen would usually reverse and break out hard through the megaphone bottom for a long run.

If the yen breaks out upward through the navy megaphone VWAP, its target is all the way to the megaphone top.

Oil Megaphone is Completing

Oil Megaphone Needs Retrace to VWAP Before Downward Breakout

Oil Megaphone Needs Retrace to VWAP Before Downward Breakout

Oil is completing its short-term megaphone. It still needs a retrace to VWAP before a downward breakout (lavender scenario). A downward breakout after a retrace to VWAP would be a strong set-up to resume short positions to at least the bottom of the three-year oil triangle. (The target for the first-rate oil trading set-up remains in the mid-60s.)

It could also break out the top (green scenario on chart) but that’s less likely.

It could also form an internal megaphone to work its way back to VWAP before a downward breakout. A lot of longs likely have stops at the low, we’re in low-volume holiday trading, and market makers are likely to go for those stops with the internal megaphone.

All I See Is A Lot Of Swinging Around VWAP Unless Price Goes Below ES 1790

ES Retested Megaphone VWAP in Making Another Megaphone En Route to Retest of Longer-Term VWAP

ES Retested Megaphone VWAP Today in Making Another Megaphone En Route to Retest of Longer-Term VWAP

All I saw today was a lot of swinging around short-term VWAP.  This is classic market maker maneuvers in low-volume, bull/bear balanced conditions.

The odds got higher today that the price is forming another short-term megaphone (which could be a continuation pattern or a bottoming pattern) en route to a retest of the larger megaphone VWAP just above ES 1790.

That VWAP is now key. The price should reverse there. If instead the price breaks out downward through that VWAP, it means a much bigger correction to at least the bottom of that megaphone, which would mean a correction to as far down as 1700, or even a bit lower. It would suggest that a topping formation has started, with maybe the left shoulder of an H&S completing with that retrace.

So if the price breaks out through the 1790 VWAP area, I won’t ride out the correction. I’ll short to the megaphone bottom and look for a set-up to get long again there.