SPY Price Channel Likely Top

SPY's Pink Price Channel Set Up in 2016 but Failed to Break Out When It was Supposed to in December

SPY’s Pink Price Channel Set Up in 2016 but Failed to Break Out When It was Supposed to in December

SPY confirmed the pink price channel on November 21, 2016 when it broke out past the previous channel high on August 23, 2016.  SPY was then in its critical decision wave for the channel.  That’s where the price either sets up a breakout into a melt-up or starts a top.

What SPY did was tag the channel top, pull back a little, and then fail to break out decisively (a breakout within a melt-up set-up would have looked like the purple scenario).

You often see this when the channel is forming a rising wedge (green scenario) or rising megaphone (orange scenario) top across the price channel top.  The rising megaphone scenario is the favorite.

Gold Still Heading Up

Gold is Putting in a False Top Near its April 17 High but is Highly Likely to Go Higher

Gold is Putting in a False Top Near its April 17 High but is Highly Likely to Go Higher

Gold has formed a new megaphone across 1250ish and has reached the level of the previous April 17 high within this megaphone. A price would often put in a false top here and retrace as far as VWAP at 1250-51ish before heading up to a new high for the megaphone.

The pink rising megaphone on the chart strongly suggests gold will head up to at least the top of the potential red triangle (that triangle bottom is likely to be redrawn).

If gold makes it as far as the blue megaphone top I’ll be redrawing the most likely scenarios.  Right now the green is such a strong favorite I’m not cluttering up the chart with others.

IWM Megaphone Update

IWM Megaphone

IWM is Still Neatly Turning at the Top of its Red Megaphone & Needs a Retrace to at Least VWAP at 113

IWM is getting closer to the bottom or right side of its pink rising megaphone and that means we’re likely closing in on the dip or correction we’ve been waiting for.

IWM could put in a swoosh to its little light blue megaphone bottom any time, then put in a triangle right shoulder for a head and shoulders top before a breakout from the pink rising megaphone to at least its bottom near the red megaphone VWAP.

IWM has been turning neatly at its big red megaphone top.  It could still break through that top in the purple scenario, which would greatly raise the odds of a trip to the red megaphone bottom.

The green scenario, which is a Sornette bubble set-up, is a set-up for a melt-up to close to 200.  The light blue scenario, a Sornette set-up failure, would set up a crash to roughly 60.  The purple and orange scenarios could keep IWM in the red megaphone for a very long time.

Neely is looking for a crash or blow-off top before a crash.

Megaphone and Neely

When Different Systems Call for the Same Thing

ES is Working on the Blue and Red Megaphones

ES is Working on the Blue and Red Megaphones

Neely put out another public call over the weekend for a major drop in the S&P. He called for an initial violent decline to below 2200 to “jolt” the markets and establish the pre-jolt high as the top for the next few years. He says the bear market will end with a retest of 1000 three to five years from now.

It just so happens that the violent decline to below 2200 scenario is virtually required by my own charts.  ES is working on the blue and red megaphones on the daily chart above.  It is redrawing the red megaphone top, which means it will need a trip to the red megaphone bottom after it completes the move out of the March 27 low.

ES also requires a retest of the navy blue megaphone VWAP at roughly 2150.  And a fast move to 2150 would complete both the mandatory retrace of the orange rising megaphone and mandatory retest of the navy blue rising megaphone bottom.

The Critical Decision Point

My trading system would then require a retest of the red megaphone VWAP at 2350.  From there, my system could put ES into a drop to some megaphone bottoms at 1800 and beyond or it could send ES off upwards into a blowoff top to 3000.

Neely expects the drop.

Neely put out some charts weeks and months ago that anticipated a top at right about where ES is now.  My megaphone set-ups suggest a top a bit higher, and taking a bit longer to complete.  But since ES is establishing a brand new top on the red megaphone, it could turn any time.

ES is retesting the top of some very long-term trading formations today (the navy blue line I keep writing about).  If it gets through 2400 today, it’s recrossing that line.

The bright blue megaphone VWAP is at 2385.

Glenn Neely runs a fund that trades his method and offers trading advice at Neowave.com and is author of The Neely Method, a book from which I’ve learned a number of valuable trading set-ups.