NQ has Maxed Out a Set of Price Channels

Nasdaq Futures (NQ) have Maxed Out a Set of Price Channel and Started a Top

Nasdaq Futures (NQ) have Maxed Out a Set of Price Channel and Started a Top

NQ has maxed out a set of price channels to its orange and silver megaphone tops using a system from The Neely Method for counting price channel waves plus traditional methods for drawing rollover channels.  Now NQ has to have started a top for the move out of the July 4th low.

But you can’t short yet.  Although you will occasionally see a very small fast top at the end of maxed out price channels, a protracted megaphone top (green scenario) is more likely and something like a rising wedge or rising megaphone top (pink scenario) would also be typical.

The pink scenario could also change the potential H&S on the chart (purple scenario) into a rising wedge top with another new high after the pullback to the orange megaphone VWAP.   You never know what kind of topping pattern you have until it completes and actually breaks out.

QQQ Takes Out June 9th High but Within a Megaphone

QQQ has Taken Out the June 9 High and Put a New High in its Red Megaphone Right Shoulder

QQQ has Taken Out the June 9 High and Put a New High in its Red Megaphone Right Shoulder

QQQ has taken out the high of the big red June 9th candle. That kills a Neely correction set-up.

There’s still a Sornette crash set-up, but even that’s dragged out a bit long.  A Sornette crash call leads 60% of the time to a crash of at least 20% that reaches the target within two weeks of the call.  We’re right around the two week mark now.

QQQ could still put in a crash to at least 105ish very quickly by putting in the green scenario, which is a megaphone right shoulder on a potential head and shoulders top.  Usually a megaphone right shoulder leads to a squeaker new high for the formation.  Then a larger H&S completes and breaks out downwards.

The 40% of the time that a Sornette crash call fails, you’ll still usually see a decent-sized correction, often within a megaphone consolidation.  In that case, we could see the purple scenario, but the blue scenario becomes the favorite.

The blue scenario is a stab at the 105 retrace target within the red megaphone.  QQQ fails to get all the way to the target and then breaks out upwards from the red megaphone after an aborted attempt to retrace to its VWAP.  This set-up would likely lead to a huge melt-up.  Think 70ish points on QQQ from the high before the dip, 600ish points on ES.

Sornette Supercomputer Calls for a Crash

The supercomputer that monitors the stock market for Didier Sornette has diagnosed a bubble in four sectors of the market and has recommended shorting the FANG stocks.

Sornette’s bubble calls result in a crash of at least 20% roughly 60% of the time.  In those cases, the crash reaches its target within two weeks of the bubble call.

The other 40% of the time, the market starts a sideways move that can take months but usually breaks out downwards into a correction of at least 20%.  Occasionally it’s less, like 15%.  It can be a lot more (like the dot-com crash).

Occasionally the sideways move is fast and results in an upwards breakout that extends the bubble.  You can get a few of these extensions (as at the top of the dot-com bubble) before a bigger crash.

QQQ is a Favorite to Put In a H&S with a Triangle Right Shoulder Here (Green Scenario)

QQQ is a Favorite to Put In a H&S with a Triangle Right Shoulder Here (Green Scenario)

QQQ is potentially putting one of the strongest possible topping patterns on its daily chart—a head and shoulders with a triangle right shoulder.  The likelihood of that topping scenario is increased by the big red candle QQQ put in a June 9.  That was a Neely short set-up for a retrace of the move out of the February 2016 low.

QQQ Needs a Retrace to the Bottom of its Light Blue Rising Wedge and Navy Blue Megaphone VWAP

QQQ Needs a Retrace to the Bottom of its Light Blue Rising Wedge and Navy Blue Megaphone VWAP

QQQ needs a serious stab at a retrace to VWAP of its navy blue long-term megaphone, which started forming in July 2014, to be legal for an upwards breakout from the megaphone (green scenario).  That would also retrace the light blue rising wedge.

QQQ could also go all the way for the navy blue megaphone bottom, but the fast topping process in the green scenario would make that scenario less likely.

The purple scenario becomes more likely if QQQ goes for delay and a more extended topping process.  The charts are aligned beautifully with Sornette’s call.

QQQ Megaphone Top vs Head & Shoulders

QQQ Megaphone Top vs Head & Shoulders Top

QQQ Megaphone Top vs Head & Shoulders Top

QQQ has bounced off the level of the May 18 low, retraced to critical megaphone VWAP levels, and returned to the May 18 low.

There’s a potential head and shoulders on the chart.  If QQQ can triangle here and then break out downwards through the May 17 low (green scenario), a head and shoulders top is likely in, especially if the red rising wedge breaks out at the same time as the H&S and triangle right shoulder.

If a triangle right shoulder fails to complete, we could be in for some trickiness.  The purple scenario is essentially a different H&S.  The blue scenario is a megaphone top on the red rising wedge.

The big red June 9 candle is a Neely short set-up that makes the green scenario the favorite, with the purple scenario second.

The correction target is the 98-106 multi-megaphone VWAP area at the bottom of the red rising wedge.

A fast stab down that reverses above that level would likely mean we’re heading up into a huge melt-up.  A breakdown through that level would target 70ish and set up a melt-up to another new all-time high.