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.

Little Price Channel is Key to What’s Next

ES has Formed a Little Price Channel (Navy Blue) at the Top of its Purple Megaphone and Blue Rising Megaphone

ES has Formed a Little Price Channel (Navy Blue) at the Top of its Purple Megaphone and Blue Rising Megaphone

ES has formed a new little price channel (navy blue) overnight. This price channel is now in the critical decision wave for starting a top vs breaking out into a melt-up.

Since ES just tagged the top of its blue rising megaphone, it’s more likely this channel will start a top. If it does break out into a melt-up, we’ll likely be redrawing that rising megaphone.

Price Channel Melt-Up (Green) vs Topping (Purple)  Scenarios

Price Channel Melt-Up (Green) vs Topping (Purple) Scenarios

If ES does break out into the green melt-up scenario, we’ll be drawing a series of roll-up melt-up channels on the chart that will tell us when the move is ending. ES could easily go for 2400.

If ES begins a top instead, it is likely to be the top before a pullback to 2150.

ES Back at Megaphone Top

ES is Back at Its Red Megaphone Top After Breaking Through 2300

ES is Back at Its Red Megaphone Top After Breaking Through 2300

ES is back at its red megaphone top after breaking through 2300.

It can start a head and shoulders top here with a quick retest of 2300 to put in the left shoulder of a head and shoulders and then bogging down at the megaphone top (green scenario) , or it can put in the quick retest and then blast off to redraw and extend the blue rising megaphone (purple scenario).

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.

Moment of Truth for the Ten-Year T-Note

ZN has been Working on a Bottom Since December 1 - Here's Where We Find Out Whether It's an Inverse H&S or Megaphone Bottom

ZN has been Working on a Bottom Since December 1 – Here’s Where We Find Out Whether It’s an Inverse H&S or Megaphone Bottom

The 10-year t-note has been working on a megaphone right shoulder for a potential inverse head and shoulders that began forming December 1. Now it is back at the inverse H&S neckline.

A quick pullback here to the right shoulder VWAP (volume-weighted average price) at roughly 124-23 would set up a breakout from the inverse H&S with a target of roughly 129 (green scenario).

A break through the neckline without a pullback first (purple scenario) would usually stall out quickly and the 10-year would form a topping formation at the neckline.  That would typically lead to a plunge to the right shoulder megaphone bottom for a retest of the low and possibly a new low.

That would be a plunge to buy, because the t-note would just have reached the low point of a larger megaphone bottom en route to a higher target.

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.

 

ES Bog Down vs Escape

ES Either Makes a Dash for It Now or It's Going to Get Bogged Down Moving Sideways in the Red Megaphone

ES Either Makes a Break for It Now or It’s Going to Get Bogged Down Moving Sideways in the Red Megaphone

ES either makes a break for it through 2300 to extend the orange rising megaphone with an interior rising megaphone (purple scenario), or it’s going to get bogged down moving sideways in the red megaphone.

In the green scenario, the red megaphone would likely be a topping megaphone before a retrace to at least 1960ish and possibly the 1800 area.  The green scenario could represent a sideways move that eats up months.