Gold Bottoming for Swing to Top of Big Falling Wedge

Gold has Formed a Megaphone (Blue) Inside a Major Falling Wedge Bottom

Gold has Formed a Megaphone (Blue) Inside a Major Falling Wedge Bottom

Gold has formed a major falling wedge bottom (purple on chart) with the minimum required touches on its sides.

Usually after putting in the minimum required touches to complete a falling wedge, a price will megaphone for a while to complete the bottoming process, and gold has established clear megaphones (one of them blue) within its falling wedge. Now gold is back at the bottom of both its blue megaphone and purple falling wedge, and it’s time for a swing to the top of both formations.

Gold is Completing a Bottom before a Swing to 1200ish

Gold is Completing a Bottom before a Swing to 1200ish

Gold will complete either a megaphone bottom, an inverse H&S or a falling wedge bottom here. An upwards breakout from any complete bottoming formation is a set-up to go long for the swing to the formation tops at roughly 1200.

 

Euro Falling Wedge Bottom Should Set Up a Good-Sized Move

Euro Futures are Completing a Falling Wedge Bottom (Red) on a Maxed Out Price Channel Move

Euro Futures are Completing a Falling Wedge Bottom (Red) on a Maxed Out Price Channel Move

There are a lot of ways of looking at what’s happening on the euro 60-minute chart. But the clearest signal comes from a couple of price channels (orange and gray on chart), for which the euro is now forming a falling wedge bottom (red on chart).

The euro has maxed out the number of waves it can put in a price channel (orange) and roll-up channel (gray) before a sideways move or bottoming pattern.  And because the channels formed within a megaphone on the euro daily chart, an upwards breakout from the red falling wedge is likely to result in a sizable move up.

The Euro is Forming a Megaphone Right Shoulder on its Inverse H&S Bottom

The Euro is Forming a Megaphone Right Shoulder on its Inverse H&S Bottom

The euro should make it back to at least its pink megaphone VWAP at roughly 1.1130. But it is likely to make a new high within the pink megaphone and could even break out upwards from it after a retrace to the megaphone VWAP.

It could also use the pink megaphone to set up a larger megaphone that incorporates the March low.  In that case, the euro could stay within the larger megaphone for years and could eventually break out in either direction.

DX H&S with Megaphone Right Shoulder

DX Megaphone Right Shoulder Means a Likely Squeaker New High

DX Megaphone Right Shoulder Means a Likely Squeaker New High

The dollar index (DX) has a formed a head and shoulders with a megaphone right shoulder (red) on its daily chart.

A megaphone right shoulder usually means a squeaker new high.  Often that new high will be the head of a larger H&S that will complete and break out downwards.  Sometimes a price will form a larger megaphone instead.  In these cases, the price can stay in the larger megaphone for years.

DX is forming a rising wedge top on the approach to its March high.

DX could also retrace to the megaphone VWAP at roughly 96 before breaking out upwards (purple scenario), but the odds of that are low.

ES Hanging Around Before Mandatory Retraces

ES Potential Rising Wedge

ES Potential Rising Wedge

ES is chopping around before carrying out mandatory retraces to 2050, 2000, 1950, 1850 and 1800.

It could head down from here to 2050 (purple and green scenarios) and bounce there or not.

There’s a potential rising wedge (navy blue on chart) that may complete or not.

There’s also a potential flat-topped triangle on the chart with a top at roughly 2110 that would likely complete (if it completes) with a fake breakout upwards before heading down (blue scenario).

The play is to stay long until a topping formation completes and breaks out downwards.  If the market were to turn down from here and put in a genuine breakout through 2050, the target would be 1950, but there could be a strong bounce off of 2000 en route.

 

Thanksgiving Top

ES is Still Working on a Top Before a Trip to 1950

ES is Still Working on a Top Before a Trip to 1950

ES is still hanging around forming small megaphones as we head into Thanksgiving. It’s working on a top before a trip to 1950 and ultimately the August 24 low, but it could hang out up here all the way into the NFP report next week if it wants to, especially since it hasn’t retested 2100 yet.

You could start a short to 2050 on any small topping pattern that breaks out downwards.  But 2050 should provide support for a bounce that may put in a small right shoulder on the larger H&S (green or purple scenarios) but could go all the way to 2150 (blue scenario), maybe completing a triangle en route.

A genuine breakout through 2050 would cancel a potential rising wedge off the August 24 low, so that would be a strong set-up to short for more conservative traders.

ES Breakout

ES has Broken Out of its Pink Rising Megaphone but has a Sideways Megaphone to Complete

ES has Broken Out of its Pink Rising Megaphone

ES has broken out of its pink rising megaphone off the Sunday night low.

It has also completed the minimum requirements for the red sideways topping megaphone, which means it’s legal to head down to the pink rising megaphone minimum retrace target of 2008, retrace to the purple megaphone VWAP at 2050, and then head down fast to 1950, where it is likely to consolidate before a move down to roughly the August 24 low.

But the red sideways megaphone would often put in one final wave to the formation top before breaking out downwards, and ES has not fully completed its trip to its likely target of 2100.

That means there’s a good chance that ES will start to megaphone here to swing the price up to a squeaker new high (green scenario) for the move out of the Sunday night low before heading down to 1950.

A genuine breakout through 2050 would usually mean the move to 1950 has started.  It would also kill the potential rising wedge on the chart off the August 24 low.

Potential Rising Wedge (Red) Off August 24 Low

Potential Rising Wedge (Red) Off August 24 Low

 

MSFT is Closing in on a Top

MSFT is Approaching its Dot-Com High - it Would Usually Put In a Squeaker New High Before Correction to at Least its Red Megaphone VWAP

MSFT is Approaching its Dot-Com High – it Would Usually Put In a Squeaker New High Before Correction to at Least its Red Megaphone VWAP

ES is putting a megaphone right shoulder on its dot-com head and shoulders top.

That means it would usually put in a squeaker new high and a topping formation at the red megaphone top before retracing to the megaphone bottom (green scenario).

It could also retrace to the red megaphone VWAP and start a long-term sideways move there (purple scenario) to work the price back to the bigger H&S neckline.

ES Potential Triangle vs Down to 1950

ES is Forming an H&S at VWAP of its Purple Megaphone - It Can Either Follow Up with a Breakout to 1950 or Come Back to Finish a Triangle

ES is Forming an H&S at VWAP of its Purple Megaphone – It Can Either Follow Up with a Breakout to 1950 or Come Back to Finish a Triangle

ES is forming a head and shoulders at 2080, which is VWAP of the purple topping megaphone.

Usually that would mean the purple megaphone is about to break out downwards with an initial target of 1950 (purple scenario). ES would probably spend some time at 1950 before continuing down to the August 24 low.

But ES could also bounce off roughly 2008 and then surge back to 2080ish to put a triangle on the chart (green scenario), and if it does the triangle could break out in either direction.

The pink scenario represents an upwards breakout and a trip to roughly 2150 to morph the potential topping triangle into a head and shoulders.

Here are the scenarios on a 60-minute chart.

ES Topping Scenarios on 60-Minute Chart

ES Topping Scenarios on 60-Minute Chart