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.

ES Megaphone Welter

ES Red Flat-Topped Megaphone

ES Red Flat-Topped Megaphone vs Blue Megaphone

First, ES has nothing that even resembles a legal top on the daily chart yet.

Second, ES is trapped in a welter of megaphones inside megaphones within its trading range since the March 1 high. No way it escapes this mess easily.

ES has a kinda sorta flat-topped megaphone on the chart (red) and has put in a false breakout through its top at roughly the March 1 high.  That would usually mean a trip down to take out the formation low (green scenario) before a breakout through the top to morph the whole mess into the blue megaphone.

Or ES could still be working on getting straight to the area of the blue megaphone top (purple scenario).

There’s a small rising megaphone on the chart out of the April 17 low that didn’t top properly with a head and shoulders inside the formation.  That would usually mean we see another stab through 2400 even if the flat-topped megaphone is in play (orange scenario).

The proper attitude toward any move within the recent trading range right now is high skepticism.  The only exception would be if a price channel meltdown sets up.  No sign of that yet.


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.


QQQ Rising Megaphone in Rising Wedge

QQQ has Formed a Rising Megaphone (Bright Blue) in its Red Rising Wedge

QQQ has Formed a Rising Megaphone (Bright Blue) in its Red Rising Wedge

QQQ is now creeping up the top of the red rising wedge it began forming a year ago.  It’s working on the top for a price-channeled move within the rising wedge, and has also formed a rising megaphone (bright blue) inside the wedge.

That blue rising megaphone counts as a way of extending the wedge.  An extended rising wedge is a strong favorite to correct to its bottom once it finally breaks down.

The rising wedge has carried QQQ to the top of a rising megaphone that began in 2010 as well as the navy blue megaphone that began forming in the summer of 2014.

QQQ needs to retrace to at least VWAP of the orange megaphone, which would take it to the bottom of the red rising wedge.  It’s a favorite to correct sooner or later to the bottom of the navy blue rising megaphone at roughly 42.

And QQQ could remain stuck in the navy blue megaphone for years to come.

QQQ Long-Term Chart

QQQ Long-Term Chart

I’ve drawn a smallish fast top on the navy blue megaphone, but tops like this can take months to form.

Note also that the green scenario is a simple, standard way for the navy blue rising megaphone to extend.  That is another trading formation that could extend for years, though usually we’d see a return to the formation bottom first.