SPY Put-Call Ratio – Both Bulls and Bears Dig In

The SPY Put-Call Ratio Dropped to Roughly Neutral Today on a Strong Rise in Open Interest

The SPY Put-Call Ratio Dropped to Roughly Neutral Today on a Strong Rise in Open Interest

SPY put and call volume both dropped today, though SPY put volume dropped a lot more–enough to bring the SPY put-call ratio back down from its upper Bollinger Band to its 20 dma.

The drop in the ratio happened on a strong rise in open interest. That means both bulls and bears were digging in today. These are perfect conditions for a triangle or similar consolidation.

ES Megaphones in Megaphones Usually Mean a Triangle

ES is Forming Megaphones (Purple) Inside Megaphones (Orange) - That Usually Means a Triangle is Forming (Red)

ES is Forming a Megaphone (Purple) Inside a Megaphone (Orange) – That Usually Means a Triangle is Forming (Red)

ES killed a potential melt-up today and instead began forming megaphones inside megaphones.  Usually a series of interior megaphones across the VWAP of larger megaphones mean that a triangle is forming.

Any triangle can be a bottoming pattern, but a triangle in this spot would usually serve as a continuation pattern for the ES move down to the critical decision point at the March low.

 

ES Megaphone Consolidation

ES is Likely Forming a Megaphone Consolidation En Route to the March Low Critical Decision Point

ES is Likely Forming a Megaphone Consolidation En Route to the March Low Critical Decision Point

ES is likely forming a megaphone consolidation en route to the March low critical decision point.

The orange interior megaphone is already well formed.  The blue megaphone is likely, but the sides could be a lot steeper (even steep enough for a swing to the March low within that megaphone).

The market is likely already in the 4th of July holiday doldrums, but as the megaphone sides get wider apart, we could see some dramatic price moves.

Rally Off the SPX 200 dma

ES is Working on a Topping Megaphone (Blue)  Inside a VWAP Megaphone (Pink) Inside a Megaphone (Blue)

ES is Working on a Topping Megaphone (Blue) Inside a VWAP Megaphone (Pink) Inside a Megaphone (Blue)

Although there’s a lot going on in the ES chart (ascending triangle failure, rising wedges, inverse H&S failure, head and shoulders patterns, a long-term price channel, a long-term rising megaphone and more), the easiest way to look at the chart since early April is as a series of megaphones inside megaphones.

Essentially ES is stuck at 2074-2079 and all the swings around that level are a lot of stop eating, distribution and noise.

ES is en route to the bottom of the larger blue megaphone that began forming back in April.  It will almost certainly retest the multi-megaphone VWAP area at 2074-2079 first and the 2092 area wouldn’t be a surprise.

The most recent interior blue megaphone will make ES legal for a plunge through the bottom of the large blue megaphone to roughly 1900 (purple scenario), but it doesn’t guarantee we’ll see it.

ES could also start a new megaphone across 2074-2079 on the likely retest of that level, but even if it does, ES is likely to complete a trip to the March low very soon, and that will be the critical decision point for a big rally vs a plunge.

What ultimately happens with these megaphones inside megaphones is that they finally take the overall shape of a triangle or head and shoulders and then break out in one direction or the other, but they can keep moving sideways and putting in fake breakouts for a very long time.