XLK Sornette Melt-Up Going Vertical

XLK is in a Megaphone 5th Wave Melt-Up and Sornette Bubble Melt-Up

XLK is in a Megaphone 5th Wave Melt-Up and Sornette Bubble Melt-Up

XLK is in a perfect Sornette bubble melt-up going vertical now.  It’s also in a megaphone 5th wave melt-up.  These are the kinds of melt-ups where right at the top everyone feels like it’s going to last forever.

XLK is just reaching the top of the red megaphone.  This move is not going to turn with an exact touch on the top.  It will break through that top and put in a topping pattern before a reversal to at least the red megaphone VWAP and almost certainly at least a retest of the August 2015 low.

I already know about earnings.  Nobody needs to explain to me why XLK can’t possibly crash.  I’m just showing you the chart.  XLK could easily get going on another bigger, faster, better melt-up after the pullback.

And again, don’t try to short at the megaphone top.  XLK could climb that top for months or put a big topping pattern up there that could murder your bankroll. Often we’d see a tall, thin rising wedge once the price is moving straight up, and a break-out from that would tend to be a great short.

IWM Megaphone Update

IWM Megaphone

IWM is Still Neatly Turning at the Top of its Red Megaphone & Needs a Retrace to at Least VWAP at 113

IWM is getting closer to the bottom or right side of its pink rising megaphone and that means we’re likely closing in on the dip or correction we’ve been waiting for.

IWM could put in a swoosh to its little light blue megaphone bottom any time, then put in a triangle right shoulder for a head and shoulders top before a breakout from the pink rising megaphone to at least its bottom near the red megaphone VWAP.

IWM has been turning neatly at its big red megaphone top.  It could still break through that top in the purple scenario, which would greatly raise the odds of a trip to the red megaphone bottom.

The green scenario, which is a Sornette bubble set-up, is a set-up for a melt-up to close to 200.  The light blue scenario, a Sornette set-up failure, would set up a crash to roughly 60.  The purple and orange scenarios could keep IWM in the red megaphone for a very long time.

Neely is looking for a crash or blow-off top before a crash.

ES Trying to Top

ES has Recrossed its Blue Megaphone Top and is Trying to Draw a New Top on its Red Megaphone Before a Trip to its Bottom

ES has Recrossed its Light Blue Megaphone Top and is Trying to Draw a New Top on its Red Megaphone Before a Trip to its Bottom

ES has reentered its light blue megaphone.  It’s topping for a drop to the bottom of the red megaphone and a retest of at least the navy blue megaphone VWAP at 2150.  If it breaks through 2150 it’s going for the navy megaphone bottom and possibly beyond.

Here’s what the light blue megaphone looks like on the 60-minute chart:

ES has Recrossed the Top of the Light Blue Megaphone - 60-Minute Chart

ES has Recrossed the Top of the Light Blue Megaphone – 60-Minute Chart

ES could retest the top of its light blue megaphone from inside and then start on a plunge all the way into year 2011 price territory.  But since ES is redrawing the red megaphone top, it is likely to spend more time drawing a small top up here before the plunge to the light blue megaphone bottom.

ES could return to the light blue megaphone top again after that but the larger formations make that unlikely.

So, we’re watching for a small top to form up here.  It will likely be a small megaphone top that makes you redraw the red megaphone top a couple of times.  Then ES is likely to start a move down that’s at least a serious try at the critical decision point at 2150.

 

 

Megaphone and Neely

When Different Systems Call for the Same Thing

ES is Working on the Blue and Red Megaphones

ES is Working on the Blue and Red Megaphones

Neely put out another public call over the weekend for a major drop in the S&P. He called for an initial violent decline to below 2200 to “jolt” the markets and establish the pre-jolt high as the top for the next few years. He says the bear market will end with a retest of 1000 three to five years from now.

It just so happens that the violent decline to below 2200 scenario is virtually required by my own charts.  ES is working on the blue and red megaphones on the daily chart above.  It is redrawing the red megaphone top, which means it will need a trip to the red megaphone bottom after it completes the move out of the March 27 low.

ES also requires a retest of the navy blue megaphone VWAP at roughly 2150.  And a fast move to 2150 would complete both the mandatory retrace of the orange rising megaphone and mandatory retest of the navy blue rising megaphone bottom.

The Critical Decision Point

My trading system would then require a retest of the red megaphone VWAP at 2350.  From there, my system could put ES into a drop to some megaphone bottoms at 1800 and beyond or it could send ES off upwards into a blowoff top to 3000.

Neely expects the drop.

Neely put out some charts weeks and months ago that anticipated a top at right about where ES is now.  My megaphone set-ups suggest a top a bit higher, and taking a bit longer to complete.  But since ES is establishing a brand new top on the red megaphone, it could turn any time.

ES is retesting the top of some very long-term trading formations today (the navy blue line I keep writing about).  If it gets through 2400 today, it’s recrossing that line.

The bright blue megaphone VWAP is at 2385.

Glenn Neely runs a fund that trades his method and offers trading advice at Neowave.com and is author of The Neely Method, a book from which I’ve learned a number of valuable trading set-ups.