Sometimes the traditional trendline analysis hides the unusual but valid crash formations. I must admit that I was slow in picking this up and only “saw” the formation after I had erased some of the other analysis.

What came out at me was the Megaphone formation that I had expected to be there at this juncture, but couldn’t see it. The Orthodox Broadening Top confirms the larger Broadening Wedge that has been there so long that you can easily miss it. In fact, I was beginning to wonder about its validity.

What this new development does is gives us a “roadmap” of our potential progress and brings the potential Flash Crash into the front row of probabilities that may occur in the next couple of weeks. The peak was “point 5.” “Point 6” is the first low, likely to occur at or below the January 31 low at 1980.90. “Point 7” will take SPX back into the Megaphone or the 50-day Moving Average currently near 2090.90. “Point 8” is the crash is the decline that takes SPX to its target. However, “Point 8” is only the end of a Wave 3, so there may also be some follow-through beyond that level.

The NDX is what got me started, since it had exceeded the top of the old Broadening Wedge trendline (dotted lines). So I simply erased the lines and began looking at the form. This is what emerged.

We may now expect to see NDX decline to or below its Wave B low at 4094.73 to validate Point 6 before reversing back into the Megaphone formation.

Regards,

Tony

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