Oil Price Channel

Oil is Working its Way Neatly Down the Blue Price Channel

Oil is Working its Way Neatly Down the Blue Price Channel

Oil is working its way neatly down the blue price channel. It’s either maxing out the channel waves before starting a megaphone bottom (green scenario) or its in the middle of a falling wedge (purple) or falling megaphone (orange) bottom already.

We’ll know which it is by when it first breaks the channel top.

Oil's Next Move Could Be to the Orange Megaphone Top or Oil Could Return to VWAP at 50 and Start a New Megaphone There

Oil’s Next Move Could Be to the Orange Megaphone Top or Oil Could Return to VWAP at 50 and Start a New Megaphone There

Oil has already done its job of confirming the orange megaphone by taking out the August 2, 2016 low.  It’s next move could go all the way for the orange megaphone top.  But oil could also return to the orange megaphone VWAP at 50 and start a new megaphone there.

If oil is going to go for the orange megaphone top, it will likely attempt a megaphone across 50 that breaks out in a Sornette melt-up set-up without a retrace to VWAP.

A series of megaphones inside megaphones across 50 would imply that oil is turning the inverse head and shoulders on the chart into either an inverse head and shoulders with a triangle right shoulder or a large triangle that will eventually break out downwards.

The inverse H&S with a triangle right shoulder is more likely, and would lead to a large move up on breakout.

QQQ Neely Signal

Biggest One-Day Slide Since August 2015 Suggests Deep Retrace of Move

On Friday QQQ Put In Its Biggest 1-Day Slide Since August 24, 2015 - That's a Neely Signal

On Friday QQQ Put In Its Biggest 1-Day Slide Since August 24, 2015 – That’s a Neely Signal

On Friday QQQ slid 5.79 points from the day’s high to low. That is the biggest one-day slide since August 24, 2015 (the capitulation move of the China bubble crash). That is a Neely signal that the move out of the August 24, 2015 low has just ended.

That suggests QQQ has started a deep retrace of that move. However, unless QQQ crashes more than 9.50 points on Monday, it suggests QQQ has higher to go after a partial retrace of that move.

QQQ reentered its pink rising wedge Friday and ended the day with a retest of its top.  It’s likely to continue down to the rising wedge bottom and beyond to at least the orange megaphone VWAP and the bottom of the silver rising megaphone.

That will be a critical decision point.

Critical Decision Point will be at 105-106ish

QQQ could reverse hard at the silver rising megaphone bottom for a breakout upwards from the orange and light blue megaphones and the silver rising megaphone into a truly magnificent move up with a target of roughly 200 (green scenario).

Or QQQ could start a megaphone there (purple scenario) that breaks the price out of the silver rising megaphone to set up a new rising megaphone (red on chart).  That would imply a new all-time high within the light blue megaphone and red rising megaphone, but not a move to 200.  Instead, QQQ would likely be putting in a double wave up within the light blue megaphone and setting up a swing to its bottom.

The Larger Crash Scenario

If QQQ is going to put in a candle larger than 9.50 points on the correction to 105-106ish, it will likely do so as part of a price channel crash set-up that takes QQQ straight to the light blue megaphone bottom before another swing to its top.

The Bots

Studies show that high-frequency trading bots tend to suppress volatility. I don’t have enough data to know how this affects things like the Neely signal.

So even though this signal back tested well for decades, keep an open mind about the possibility of a megaphone starting here rather than an immediate correction.

The Price Action to Watch For

However, the price action usually won’t lie.  If the market’s heading down from here to 105-106ish or beyond, the move would usually start as a price channel.  In the critical decision wave, we’d usually see either a conventional breakout into a series of melt-down channels, or we’d see a large falling megaphone bottom start.

Large falling megaphone bottoms tend to break out of a price channel like a conventional melt-down set-up, then retrace all the way to the price channel top, then break down out of the channel past the first channel breakout.

Either could reverse at 105-106ish, but a falling megaphone would be a tell that a reversal there is a strong favorite.

Plug for a Friend’s Fiction Site

My blackjack team partner, Arnold Snyder, publishes a fiction website at Write-aholic.com. The site has reviews of novels and Arnold’s own fiction.  If you like fiction, I think you’ll like the site.

He wrote one of my favorite short stories, Finding God on LSD (A Short Story About Schizophrenia) and is now publishing online a series of short novels he calls Smut4Nerds.  Hilarious.

He also wrote Risk of Ruin, which I happen to like a lot. It’s a novel about an antisocial profession gambler/biker who ignores the odds and takes up with a stripper who believes she’s God.

ES Trading Set-Ups

ES Red Megaphone vs Gray Megaphone vs Blue Falling Megaphone vs Orange Triangle

ES Red Megaphone vs Gray Megaphone vs Blue Falling Megaphone vs Orange Triangle

ES is bogged down in a megaphone (gray) across VWAP (the volume-weighted average price) of the red megaphone.  ES was legal for a downwards breakout from the gray megaphone to roughly 2300, but got stopped by the March 27 low.

Now ES is back at the gray and red megaphone VWAP and a critical decision point.

The Triangle Set-Up

ES could start a new megaphone across the gray and red megaphone VWAPs.  That would almost certainly mean the orange triangle is going to complete (pink and navy scenarios).  It could break out in either direction, but a upwards breakout would be stopped by the red megaphone top, while a downwards breakout would target at least 2150 and could go all the way to 1800 or even year-2011 territory.

The Sornette Melt-Up Set-Up

If ES tries to form a megaphone across the red megaphone VWAP and then breaks out of it upwards without a retrace to VWAP it’s a Sornette melt-up set-up.  This would mean a fast move to the area of the gray and red megaphone tops (purple scenario).

The Falling Megaphone Set-Up

If ES forms a quick head and shoulders top at the red megaphone VWAP and then plunges down to take out March 27 low, it’s confirming the blue falling megaphone (green scenario).

The falling megaphone would usually bottom with an inverse head and shoulders that tags or crosses 2300 before putting in a right shoulder pullback from the falling megaphone top.  When the price breaks out of the blue falling megaphone and inverse H&S, it would be a strong set-up for a move to at least 2390 and almost certainly a new all-time high at the red megaphone top.

ES Triangle vs Megaphone

ES has a Potential Price Channel (Navy Blue) Set-Up within a Redrawn Triangle (Orange) or the Red Megaphone

ES has a Potential Price Channel (Navy Blue) Set-Up within a Redrawn Triangle (Orange) or the Red Megaphone

ES has drawn a potential price channel (navy blue) or falling megaphone overnight.  A move down to a new low from here or right about here would confirm the channel or falling megaphone.

If a price channel is confirmed, ES would be in the channel’s critical decision wave between starting a bottom (green scenario) and setting up a meltdown (pink scenario).

The pink meltdown scenario is unlikely.  Although ES broke out of a legal triangle (orange) it is more likely to be redrawing that triangle than to actually have broken out of it unless the breakout is a move within the larger red megaphone.

If ES moves straight up from here instead, it is most likely redrawing the orange triangle, which could break out in either direction (purple or blue scenario).