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.

 

 

QQQ Likely Triangle

QQQ is Forming a Series of Megaphones inside Megaphones Across Roughly 139 - Would Usually Mean a Triangle

QQQ is Forming a Series of Megaphones inside Megaphones Across Roughly 139 – Would Usually Mean a Triangle

QQQ is forming a series of megaphones inside megaphones across roughly 139, with three gaps already around that level. That would usually mean a triangle is forming.

A triangle at the VWAP of a megaphone (navy blue on chart) would usually be a continuation pattern for a trip to the megaphone bottom (green scenario).  The purple scenario represents a Sornette melt-up pattern at the red megaphone VWAP before a melt-up to another new all-time high at the red megaphone top.

QQQ Rising Wedge

A Downwards Breakout from a Triangle would Likely Target the Bottom of the Red Rising Wedge

A trip to the navy blue megaphone bottom would likely target the bottom of the red rising wedge on the daily chart. A bounce there and breakout from the red rising wedge would target the wedge bottom.

QQQ Bounce

QQQ Just Bounced a Second Time Off the Bottom of its Blue Rising Megaphone

QQQ Bounced a Second Time Off the Bottom of its Blue Rising Megaphone

QQQ bounced a second time off the bottom of its blue rising megaphone on Friday. That’s fussy trading.

A genuine breakout through 141 means another new high. Otherwise QQQ is stalling, forming something like a triangle before the trip to the red rising wedge bottom, a bounce there, and breakdown to at least the mandatory retrace level of 105-106.