GDXJ Inverse H&S

GDXJ Inverse H&S (Red Neckline)

GDXJ Inverse H&S (Red Neckline)

GDXJ has an inverse H&S bottom on its long-term charts (red neckline).  It’s also formed a megaphone off the bottom (blue) and just put in the retrace to VWAP that makes the megaphone legal for an upwards breakout.

That means GDXJ could head straight up from here for a breakout from the inverse H&S, with a target of roughly 100 (green scenario).

The purple scenario represents a triangle right shoulder on GDXJ’s inverse H&S, with follow-through on a larger inverse H&S set-up.

The orange scenario represents a breakdown through the blue megaphone VWAP for a new low near zero.  The odds of this are extremely small.

The pink scenario represents a false breakout through the red inverse H&S neckline to put a megaphone right shoulder on the formation.  If you see GDXJ reenter the inverse H&S after a small breakout, get ready to buy the dip just below 25.

The longer GDXJ spends down here forming a right shoulder, the more likely it is to break out quickly through 100 when it finally heads up.

Yen Critical Decision Point

Yen Inverse H&S Bottom (Red Neckline) vs Blue Falling Megaphone

Yen Inverse H&S Bottom (Red Neckline) vs Blue Falling Megaphone

Yen futures have completed an inverse head and shoulders bottom with a megaphone right shoulder (silver) on the drop out of last August’s high.

The yen has just retraced to VWAP (the volume-weighted average price) of that megaphone right shoulder and is now legal for a breakout upwards from the inverse H&S (purple scenario).

But if the yen can break down through VWAP for a trip to the megaphone bottom, if will put in a new low for the move out of the August high and confirm the blue falling megaphone.  That would be nice to see because it would usually provide a strong set-up for a melt-up to the formation top (green scenario).

The yen could also bog down forming megaphones inside megaphones across the silver megaphone VWAP (pink scenario).  This would usually mean a continuation triangle before a move to a new low to complete a wider falling megaphone.

US Dollar Update

DX is at the VWAP of its Long-Term Megaphone (Red)

DX is at the VWAP of its Long-Term Megaphone (Red)

The dollar is hung up at the VWAP (volume-weighted average price) of a very long-term megaphone that began forming in the late 1980s (red on chart).  It’s also paused just above the breakout point from a falling wedge top connecting the 1985 and 2002 dollar highs.

DX Megaphone (Purple) vs Triangle (Green) Scenario

DX Megaphone (Purple) vs Triangle (Green) Scenario

DX got to its recent high within the red rising megaphone on the second chart.  That high pierced the formation top before reentering and would usually make a new high within the formation before breaking out of it.

Then DX must return to at least the base of the rising megaphone at roughly 93.

It could get there by returning to the blue megaphone VWAP at roughly 95 and starting a new megaphone there (green scenario).  The green scenario could produce a series of new megaphones inside megaphones across 95 to form a big continuation triangle before the dollar continues up to the top of its long-term red megaphone.

But it’s more likely that the dollar will continue through 95 to the bottom of its blue megaphone to form the larger orange megaphone.

Gold is Approaching its 1250 Critical Decision Point

Gold is Approaching its Critical Decision Point at the Purple Megaphone VWAP

Gold is Approaching its Critical Decision Point at the Purple Megaphone VWAP

Gold is approaching its purple megaphone VWAP (volume-weighted average price) and critical decision point at 1250.

Gold had a mandatory retrace requirement to 1250 before it could legally break out downwards from the purple megaphone and through the orange megaphone VWAP at roughly 1140 for a trip to the orange megaphone bottom in the 700s.  So gold could reverse at 1250 for that plunge.

Gold is Approaching 1250 within the Red Rising Megaphone on the 60-Minute Chart

Gold is Approaching 1250 within the Red Rising Megaphone on the 60-Minute Chart

Gold is approaching 1250 within the red rising megaphone on the 60-minute chart. This rising megaphone would typically complete with a head and shoulders top inside the formation that breaks out at the same time as the formation for a plunge to its bottom at 1200.

From 1200, gold could go blasting off past the July 2016 high for a breakout from a big inverse head and shoulders on the weekly charts.  That’s unlikely with a chart like this.

More likely, gold will either enter into the green megaphone-in-megaphone scenario on the top chart to complete a triangle (red on top chart) that could break out in either direction, or gold will complete the navy blue megaphone top on the 60-minute chart and break out downwards into the 700s.

The green triangle scenario is the strong favorite, but remember that Neely has a big correction set-up on his SPX charts for February or March that could mean an atypical move for gold too.

ES Triangle Would Mean Bog-Down Scenario

The Blue Triangle would Confirm a Bog-Down Scenario

The Blue Triangle would Confirm a Bog-Down Scenario

Friday’s post was about how ES needed to make a fast break through 2300 and keep going to avoid getting locked into a bog-down scenario.

Now it looks like it may be forming the bright blue triangle on the chart. That triangle would all but lock it into the bog down scenario.

The bog-down scenario represents ES trapped in a megaphone (red on chart) across roughly 2250.  That limits ES’s potential upside after its coming dip to 2150ish to roughly the top of the red megaphone.

ES will be a favorite to correct to at least 1960, and possibly 1800ish, after that.

Neely is looking for that pullback to turn into a much larger correction.  I have set-ups for that on the long-term charts, but also a set-up for this move up out of the 2011 crash to extend.

 

Gold Update

Gold Appears to Be Forming an Interior Megaphone Across VWAP of its Blue Megaphone, Raising the Odds a Triangle is Forming

Gold Appears to Be Forming an Interior Megaphone Across VWAP of its Blue Megaphone

Gold appears to be forming an interior megaphone across VWAP of its blue megaphone.

While this could be a bottoming formation before an upwards breaking from the blue megaphone, or a quick consolidation before a plunge to the blue megaphone bottom, it’s more likely that gold is forming a triangle along the bottom of its red rising megaphone.

That triangle could break out in either direction. A downwards breakout would take gold to the blue megaphone bottom and its long-term retrace target of the bottom of the red rising megaphone.

An upwards breakout would mean the red rising megaphone is extending.

The green scenario is a strong favorite. A meltdown to the blue megaphone bottom would be a strong set-up to buy gold for long-term.