SPY Price Channel Scenarios

SPY Could Dip to Roughly 127 to Set Up a New Price Channel (Gray) or Just Dip to the Bottom of the Purple Channel

SPY Could Dip to Roughly 193.21 to Set Up a New Price Channel (Gray) or Just Dip to the Bottom of the Purple Channel

SPY has definitely set up a steeper price channel to roll into.  What’s not clear yet is whether that channel will remain the purple channel on the chart, or whether SPY will dip past the bottom of that channel to roughly 193.21 and set up a different channel (gray on chart).  The gray channel is more likely.

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Yen Breakout and Retrace Scenario

Yen Megaphone Spike and Retrace Scenario

Yen Megaphone Spike and Retrace Scenario

I’m sure you’ve noticed that yen futures have broken out downwards from their 9-month triangle (red lines).

But they’ve broken out within a pair of nested megaphones (pink and navy blue lines), and that should affect how the breakout and retrace play out.

First, yen futures have to spike through the bottom of the navy blue megaphone that’s been forming since early October. Then the price would usually retrace to megaphone VWAP before resuming its downward move. That VWAP intersects the bottom of the 9-month triangle in roughly mid-December.

Historical Chart of USD/JPY

Historical Chart of USD/JPY

My view of the yen long-term is that the USD/JPY is in the middle of a multi-year bottoming pattern (with the yen obviously in a multi-year topping pattern). It’s not clear yet whether the USD/JPY pattern is going to be an ending diagonal/falling wedge, inverse head and shoulders, or megaphone.

 

Price Action That Would Change the Odds at the 200 dma & Trend Line

A Triangle at a Potential Neckline Would Change the Odds at the 200 dma

A Triangle at a Potential Neckline Would Change the Odds at the 200 dma

You need triangles and/or wedges to reverse a significant move because these formations are the footprint of big money changing sides, and it takes big money changing sides to reverse a significant move.

Assuming the price on the E-mini/SPX makes it back to the potential neckline after having broken out of the bottom of the short-term ascending wedge, a triangle moving sideways there would improve the odds of the price breaking through the 200 dma and trend line from the October 2011 low.

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