SPX is making an announcement through a Megaphone topping pattern. Now hear this! “I am setting my sights on point 5 of an Edwards & Magee style Megaphone/Expanding Top/Reverse Symmetrical Triangle pattern.”
The common interpretation of a Megaphone is as a reversal pattern, just as its opposite, a Symmetrical Triangle, is a continuation pattern.
I have only seen this current specimen in one place illustrated by one man who stares at charts. It is not linked because it was provided privately. There may be more alert men who stare at charts out there seeing a Megaphone, but I’ve only noted one (and I have not had much time to scour the internet looking).
Anyway, with all due caveats about how we Men Who Stare at Charts…
…are able through shear determination to make our charts say what we want them to say I will say that it sounds like as good a plan as any at this time.
Weekly SPX is bullish. Period. I had stared at the chart below previously, imagining an upper channel line that had not yet appeared, but had that prospect taken out shortly after SPX crossed our upper limit to a top-test, which was 2815. I left the line on the chart so as not to hide from a failed although not necessarily favored projection.
But the Megaphone, complete with its 5 points is viable. A couple things…
Thing 1: There are no certainties in TA. These patterns sometimes fail to reverse, instead proving to be continuation patterns. Just as a Symmetrical Triangle is usually a continuation a broadening top Megaphone is usually a reversal pattern.
Thing 2: SPX can get all the way down to our original downside target from last year (2100-2200) and still remain within the pattern. So even if the pattern does not break down into a major bear market, it can hit the lower line some weeks or months down the road.
For good measure let’s add Thing 3, which is the lateral resistance from the September top that SPX is approaching right now. It’s a top-test after all, and the Megaphone would come into play as a candidate if SPX breaks out (which would be classic as a potential bull trap because breakout players and FOMOs would be momo’ing this thing left and right).
Okay then, Thing 4 advises that our old target of SPX 3000 could come back into play at point 5 as the weeks or months drag on.
So there could be a fair amount of bullish and a big chunk of bearish in the view over the next 6 months. [edit] Pending the top-test, obviously.
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