GDXJ Inverse H&S

GDXJ Inverse H&S (Red Neckline)

GDXJ Inverse H&S (Red Neckline)

GDXJ has an inverse H&S bottom on its long-term charts (red neckline).  It’s also formed a megaphone off the bottom (blue) and just put in the retrace to VWAP that makes the megaphone legal for an upwards breakout.

That means GDXJ could head straight up from here for a breakout from the inverse H&S, with a target of roughly 100 (green scenario).

The purple scenario represents a triangle right shoulder on GDXJ’s inverse H&S, with follow-through on a larger inverse H&S set-up.

The orange scenario represents a breakdown through the blue megaphone VWAP for a new low near zero.  The odds of this are extremely small.

The pink scenario represents a false breakout through the red inverse H&S neckline to put a megaphone right shoulder on the formation.  If you see GDXJ reenter the inverse H&S after a small breakout, get ready to buy the dip just below 25.

The longer GDXJ spends down here forming a right shoulder, the more likely it is to break out quickly through 100 when it finally heads up.

Yen Critical Decision Point

Yen Inverse H&S Bottom (Red Neckline) vs Blue Falling Megaphone

Yen Inverse H&S Bottom (Red Neckline) vs Blue Falling Megaphone

Yen futures have completed an inverse head and shoulders bottom with a megaphone right shoulder (silver) on the drop out of last August’s high.

The yen has just retraced to VWAP (the volume-weighted average price) of that megaphone right shoulder and is now legal for a breakout upwards from the inverse H&S (purple scenario).

But if the yen can break down through VWAP for a trip to the megaphone bottom, if will put in a new low for the move out of the August high and confirm the blue falling megaphone.  That would be nice to see because it would usually provide a strong set-up for a melt-up to the formation top (green scenario).

The yen could also bog down forming megaphones inside megaphones across the silver megaphone VWAP (pink scenario).  This would usually mean a continuation triangle before a move to a new low to complete a wider falling megaphone.

Moment of Truth for the Ten-Year T-Note

ZN has been Working on a Bottom Since December 1 - Here's Where We Find Out Whether It's an Inverse H&S or Megaphone Bottom

ZN has been Working on a Bottom Since December 1 – Here’s Where We Find Out Whether It’s an Inverse H&S or Megaphone Bottom

The 10-year t-note has been working on a megaphone right shoulder for a potential inverse head and shoulders that began forming December 1. Now it is back at the inverse H&S neckline.

A quick pullback here to the right shoulder VWAP (volume-weighted average price) at roughly 124-23 would set up a breakout from the inverse H&S with a target of roughly 129 (green scenario).

A break through the neckline without a pullback first (purple scenario) would usually stall out quickly and the 10-year would form a topping formation at the neckline.  That would typically lead to a plunge to the right shoulder megaphone bottom for a retest of the low and possibly a new low.

That would be a plunge to buy, because the t-note would just have reached the low point of a larger megaphone bottom en route to a higher target.

Gold is Approaching its 1250 Critical Decision Point

Gold is Approaching its Critical Decision Point at the Purple Megaphone VWAP

Gold is Approaching its Critical Decision Point at the Purple Megaphone VWAP

Gold is approaching its purple megaphone VWAP (volume-weighted average price) and critical decision point at 1250.

Gold had a mandatory retrace requirement to 1250 before it could legally break out downwards from the purple megaphone and through the orange megaphone VWAP at roughly 1140 for a trip to the orange megaphone bottom in the 700s.  So gold could reverse at 1250 for that plunge.

Gold is Approaching 1250 within the Red Rising Megaphone on the 60-Minute Chart

Gold is Approaching 1250 within the Red Rising Megaphone on the 60-Minute Chart

Gold is approaching 1250 within the red rising megaphone on the 60-minute chart. This rising megaphone would typically complete with a head and shoulders top inside the formation that breaks out at the same time as the formation for a plunge to its bottom at 1200.

From 1200, gold could go blasting off past the July 2016 high for a breakout from a big inverse head and shoulders on the weekly charts.  That’s unlikely with a chart like this.

More likely, gold will either enter into the green megaphone-in-megaphone scenario on the top chart to complete a triangle (red on top chart) that could break out in either direction, or gold will complete the navy blue megaphone top on the 60-minute chart and break out downwards into the 700s.

The green triangle scenario is the strong favorite, but remember that Neely has a big correction set-up on his SPX charts for February or March that could mean an atypical move for gold too.

Gold Update

Gold Appears to Be Forming an Interior Megaphone Across VWAP of its Blue Megaphone, Raising the Odds a Triangle is Forming

Gold Appears to Be Forming an Interior Megaphone Across VWAP of its Blue Megaphone

Gold appears to be forming an interior megaphone across VWAP of its blue megaphone.

While this could be a bottoming formation before an upwards breaking from the blue megaphone, or a quick consolidation before a plunge to the blue megaphone bottom, it’s more likely that gold is forming a triangle along the bottom of its red rising megaphone.

That triangle could break out in either direction. A downwards breakout would take gold to the blue megaphone bottom and its long-term retrace target of the bottom of the red rising megaphone.

An upwards breakout would mean the red rising megaphone is extending.

The green scenario is a strong favorite. A meltdown to the blue megaphone bottom would be a strong set-up to buy gold for long-term.

10-Year T-Note Potential Inverse H&S

ZN is Massing Against the Neckline of a Potential Inverse H&S

ZN is Massing Against the Neckline of a Potential Inverse H&S

The 10-year t-note is massing against the neckline of a potential inverse H&S.

Usually when you see this kind of massing, the price will break out through the neckline. Usually the breakout is clean and the price keeps moving up. Occasionally the breakout will lead to more sideways as a triangle right shoulder morphs into a megaphone right shoulder.

ZN has Formed the Black Megaphone and would Usually Retrace to the Megaphone VWAP Before Breaking Out Downwards

ZN has Formed the Black Megaphone and would Usually Retrace to the Megaphone VWAP Before Breaking Out Downwards

ZN has been working on the black megaphone since the fall of 2014. Usually ZN would retrace to the megaphone VWAP (volume-weighted average price) before breaking out downwards.

The black megaphone is comprised of a series of smaller megaphones (red and aqua) across VWAP and could itself be part of a larger formation, like a big topping triangle. That means we could see more megaphones inside megaphones across VWAP to complete the larger formation before a downwards breakout.

ZN Got Up Here Via a Series of Rising Megaphones (Aqua & Orange)

ZN Got Up Here Via a Series of Rising Megaphones (Aqua & Orange)

ZN got up here via a rising megaphone (aqua) that extended with another rising megaphone (orange) up its bottom.  It failed to put in a clean top within the orange rising megaphone.  That suggests that some larger topping pattern is forming with this extended sideways move before ZN returns to the bottom of the aqua rising megaphone.

Gold Price Channel

Gold has Confirmed the Red Price Channel on its 60-Minute Chart & is in Its Critical Decision Wave

Gold has Confirmed the Red Price Channel on its 60-Minute Chart & is in Its Critical Decision Wave

Gold has confirmed the red price channel on its 60-minute chart and is in the channel’s critical decision wave. That’s where the channel usually either starts a top or breaks out into a melt-up.

The Melt-Up Scenario Could Retest the July High or Even Break Gold Out of the Big Blue Megaphone While a Top Here Could Lead to Further Consolidation or a Trip to the Big Blue Megaphone Bottom

The Melt-Up Scenario Could Retest the July High or Even Break Gold Out of the Big Blue Megaphone While a Top Here Could Lead to Further Consolidation or a Trip to the Big Blue Megaphone Bottom

If gold starts a top here it could be the top before a crash to the bottom of the big blue megaphone gold has been forming since late 2014. That would be a crash to buy.

A breakout into a melt-up could target a retest of the July 2016 high or even an upwards breakout from the big blue megaphone.

A top here could also lead to a prolonged period of megaphoning across 1200 to morph the big blue megaphone into a triangle. The triangle could break out in either direction but would be a favorite to break out downwards to take gold down into the 700s to put in the final bottom for its correction off the 2011 high.

Gold Inverse Head and Shoulders

Gold has Formed an Inverse H&S Bottom for a Retrace to at Least 1250

Gold has Formed an Inverse H&S Bottom for a Retrace to at Least 1250

Gold has formed an inverse head and shoulders bottom (red neckline) for a mandatory retrace to a megaphone VWAP at 1250.

It looks like gold may complete a megaphone right shoulder (blue) on the inverse H&S before getting going on its move. If not, it’s broken out.

Gold Big Megaphone Bottom on the Daily/Weekly Charts

Gold Big Megaphone Bottom on the Daily/Weekly Charts

Gold is working on a big megaphone bottom (blue on daily chart) for its move down out of the 2011 high.  It could reverse at 1250 (green scenario) for a trip to the blue megaphone bottom.

Or it could blast right through 1250 (purple scenario) for a trip to the purple megaphone top before a retrace to the 1250 VWAP again to set up a breakout from the big inverse H&S on the chart.

Or it could start a new megaphone across 1250 that would eventually spin off new megaphones across 1250 (orange scenario) to form a triangle right shoulder (red) on the big inverse H&S on the chart.

Gold is Deciding Whether to Extend its Move Up (Purple Scenario) or Retrace to the Bottom of its Pink Rising Megaphone

Gold is Deciding Whether to Extend its Move Up (Purple Scenario) or Retrace to the Bottom of its Pink Rising Megaphone

Essentially gold is deciding whether to complete its long-term rising megaphone (pink) with a breakout to the formation bottom or extend its move up with an inverse H&S here before a move to a new high.