Crash Set-Ups

Neely Crash Call

IWM Megaphone Crash Set-Up

IWM has a Clear Crash Set-Up to the Bottom of its 3-Year+ Red Megaphone

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 Flat-Bottomed Megaphone Top

ES has a Flat-Bottomed Megaphone Top on the Long-Term Chart with a Technical Target of 1200ish

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 Needs a Retrace to its Silver Megaphone VWAP

QQQ Needs a Retrace to its Silver Megaphone VWAP

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.

Better Entries

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.

SPY Put-Call Ratio – Both Bulls and Bears Dig In

The SPY Put-Call Ratio Dropped to Roughly Neutral Today on a Strong Rise in Open Interest

The SPY Put-Call Ratio Dropped to Roughly Neutral Today on a Strong Rise in Open Interest

SPY put and call volume both dropped today, though SPY put volume dropped a lot more–enough to bring the SPY put-call ratio back down from its upper Bollinger Band to its 20 dma.

The drop in the ratio happened on a strong rise in open interest. That means both bulls and bears were digging in today. These are perfect conditions for a triangle or similar consolidation.

SPY Put-Call Ratio Crashes Heading Into Opex Friday

The SPY Put-Call Ratio Crashed Its Bottom Bollinger Band Heading Into Opex Friday

The SPY Put-Call Ratio Crashed Its Bottom Bollinger Band Heading Into Opex Friday

As expected, the SPY put-call ratio crashed its bottom Bollinger Band today. You see this a lot on triple witching Thursdays.

The ratio closed at 0.96.  Heading into opex Friday, a move down in the ratio this strong away from the ratio’s 20 dma would tend to be bearish for the price tomorrow.

SPY put volume rose today by 61% on another strong rise in open interest.  SPY call volume rose by 190%.

The set-up is very similar to other triple witching Thursdays.  On those Thursdays, you tend to see either big moves up within trading ranges or small breakouts to a new high.  These moves trigger a lot of bullish sentiment.  You tend to see a strong rise in both open interest and SPY put and call volume.

But the move tends to be either the top before a significant dip, or it’s a breakout within a megaphone that will lead first to a dip, then a higher high, then a bigger dip, and so on.  When the triple witching Thursday move occurs within a megaphone, it can break out in either direction.

 

 

 

 

SPY Put-Call Ratio Falls Slightly

The SPY Put-Call Ratio Fell Slightly Heading into Triple Witching Thursday

The SPY Put-Call Ratio Fell Slightly Heading into Triple Witching Thursday

The SPY put-call ratio fell from 1.75 to 1.72 today on another good-sized rise in open interest.

SPY put volume rose by 13%. SPY call volume rose by 15%.

The SPY put-call ratio tends to fall to its bottom Bollinger Band on Thursdays of triple witching weeks, and the move tends to occur in the context of a price rally. Then the ratio tends to rise to close to its 20 dma on Friday.

The strongest price rallies tend to occur when the ratio has a longer way to go to its bottom Bollinger Band.  Nevertheless, tomorrow is likely to be a good day to buy the dip for a day.