Neely Crash Call
Yesterday I posted that Glenn Neely has put out a public crash warning. He says the only other times he’s had this crash set-up were at the tops in 1987, 2000, 2007 and August 2015.
He said his crash call was based on current wave structure, U.S. margin debt, insider selling, overbought warnings from his Moat Index, a rising interest rate environment and the volume of new accounts being opened at brokerage firms in 2017 around the country.
Neely didn’t mention the collapse in new loans or the recent federal budget surpluses, but I’ve been concerned about those. The crash in new loans suggests a lack of new money formation. And Warren Mosler has written at length about the connection of Bill Clinton’s budget surpluses to the 2000 dotcom crash.
IWM Megaphone Crash Set-Up
And the long-term charts have great technical set-ups for a crash as well. IWM is working on a top for the pink rising megaphone at the top of its 3-year+ red megaphone. The red megaphone requires a move to at least VWAP when that top completes. Neely is calling for a bigger crash, which would mean a move all the way to the red megaphone bottom. That would be the favorite scenario if IWM breaks through the red megaphone top to complete a top on the pink rising megaphone (purple scenario).
Neely is looking for his crash within the next 1-3 months. IWM needs to work its way across the pink rising megaphone while forming a top, and that’s about how long that process will take.
ES Flat-Bottomed Megaphone Crash Set-Up
ES has a series of rising megaphones in rising megaphones on its long-term chart as well as a huge flat-bottomed megaphone (red), which is also a head and shoulders with a megaphone right shoulder. A breakout through the neckline at roughly 1800 would target roughly 1200.
Right now ES is working on interior rising megaphones (gray and navy blue) and is likely to complete a head and shoulders inside the bright blue rising megaphone before breakout. In that case, a breakout from the blue rising megaphone would be a strong set-up to short.
QQQ Crash Set-Up
QQQ not only needs a retrace to VWAP of its silver megaphone, which started forming in June 2005, but also a retrace to its pink and blue rising megaphone bottoms near that VWAP.
It’s also working on the red megaphone and needs a crash to its bottom.
QQQ is working on an extended rising wedge top and is likely to complete a head and shoulders top inside the pink rising megaphone. A combined breakout from that and the pink rising megaphone would be a strong set-up to short.
Crashes Usually Form Price Channels
A crash usually forms a price channel very close to the start of the crash. So I’ll be posting any price channel melt-down set-ups if we get one.
The heads of H&S tops inside rising megaphones usually form small H&S tops of their own. These are usually a terrific way to get into a crash set-up at the very top. I’ll post them if we get them.
Alternatives to a Crash
Every index has outs on the chart that could avert a crash, though every one requires at least some kind of significant dip soon. If those dips convert into more upward extensions, I’ll post that here.