Critical Retest and Tell

Fast Stab Lower vs Up Into Fast Top vs Up Into Prolonged Topping

ES is Headed Up to its Red Megaphone VWAP and a Retest of the Inside of its Navy Blue Megaphone Top

ES is Headed Up to its Red Megaphone VWAP and a Retest of the Inside of its Navy Blue Megaphone Top

ES is headed up to its red megaphone VWAP and a retest of the inside of its big navy blue megaphone top.  If it reverses there, it will likely take out the March 27 low.

That kind of fast stab at the navy blue megaphone VWAP that fails to get there would be a perfect set-up for a breakout upwards from the megaphone into a melt-up (light blue scenario).

See the melt-up set-up I posted recently for IWM.

If ES breaks through the navy blue megaphone top it’s still working on a topping pattern before a plunge to at least VWAP and possibly the megaphone bottom and beyond.

The purple scenario represents the kind of fast top that could reverse at VWAP back to the navy blue megaphone top before a huge move down. (I missed a mandatory bounce in that scenario, but you get the idea.)

The green scenario represents the kind of prolonged topping process that would usually lead all the way to a trip to the navy megaphone bottom and then back to its top.

Neely and Corzine

In the IWM post I link to a post about Glenn Neely’s public call for a crash. Yesterday I saw that Jon Corzine, the Democrat bundler who took down MF Global along with hundreds of millions of dollars in customer accounts, was trying to set up a third hedge fund to bet on a Trump crash.

When you start getting lots of people making public calls for crashes, especially for bad reasons, you often get melt-ups instead.

IWM Technical Top vs Passionate Top

Crashes Don’t Start on Technical Trading

IWM Keeps Reversing on Exact Touches of its Red Megaphone Top

IWM Keeps Reversing on Exact Touches of its Red Megaphone Top

IWM keeps reversing on exact touches of its 3 1/2 year red megaphone top. It could do that all the way to a breakout from the pink rising megaphone.

If it does, the green or blue scenarios become the favorite.  Great crashes don’t start on exact reversals from important lines.

If IWM can break through the red megaphone top by enough to form a topping pattern up there, it becomes a favorite to go all the way for the red megaphone bottom after it completes a top and breaks out of the pink rising megaphone.

Potential Set-Up for One of the Great Bull Markets of All Time

Note that the green scenario’s reversal at the red megaphone VWAP would lead to either a second trip to the red megaphone top before a crash to its bottom, or a genuine breakout from the red megaphone (blue scenario) with a technical target of at least 200, and the breakout could lead into one of the great bull markets (or bubbles) of all time.

The blue scenario would essentially convert the red megaphone into a giant Sornette melt-up set-up.

I posted a few days ago that Neely is looking for a market crash.  When you have a set-up for a crash, and the market won’t crash, that’s a great set-up for a melt-up.

 

Sornette Melt-Up Set-Up on 60-Minute Chart

Sornette Melt-Up Set-Up (Green Scenario) on ES 60-Minute Chart

Sornette Melt-Up Set-Up (Green Scenario) on ES 60-Minute Chart

SPY has gapped up to trigger a Sornette melt-up set-up on the ES 60-minute chart.  Essentially the melt-up set-up is the little gray megaphone across the blue megaphone VWAP at 2362.  In a Sornette melt-up set-up, that little gray megaphone would break out upwards without a retrace to VWAP.

Usually you’d see a double bobble as the melt-up gets going.  The first could be a pullback from the megaphone top or a retest of the previous megaphone high.  The second should not take out the low of the first.  The second may be very fast and nearly invisible.

If instead SPY decides to fill its gap and the second bobble takes out the low of the first (purple scenario), it’s likely a megaphone is forming before a larger move down to the gray megaphone bottom.  It would probably mean a retest of 2300.

Either way, there’s a great chance ES is working its way to a new all-time high to put a new top on the red megaphone.  If the new high is going to cancel, we’d likely see a triangle form between 2300 and 2362ish and break out downward into a drop to at least 2150.

Still Working on that Breakout

Sornette vs Megaphone vs Rising Megaphone Breakout Set-Ups

Sornette vs Megaphone vs Rising Megaphone Breakout Set-Ups

ES is still working on a set-up for a genuine breakout through the blue megaphone VWAP at roughly 2362.

The green scenario represents a Sornette melt-up breakout set-up.

The purple scenario represents a right shoulder megaphone on the inverse H&S on the chart.

The orange scenario represents a rising megaphone breakout set-up that will confirm if ES can put a new high in the potential red rising megaphone before a breakout through its bottom.

If ES breaks out downwards from the right shoulder megaphone in the purple scenario, it could be setting up a continuation pattern for a correction to 2150 before a new all-time high (not drawn on chart).  That is the least likely scenario at the moment.