Reprise of 2007: Bear Impulses Down Likely to Accelerate

The markets are in frail shape. Friday's activity was particularly disturbing in that the markets could not even get the strength to use a prime setup and structural setup to squeeze bears. Markets made a swift reversal out of Buy Extreme resistance starting around 1:00 PM and never really looked back. While a continued bounce is possible very near-term (not that we are saying is likely or favored since probabilities are leaning the opposite currently), longer-term MSP and Daily MSP all suggest downward probabilities for the near future as has been consistently posted regarding this time frame on these pages. We thought it would be, considering the potential impulsive cycle activity developing in the markets, important to look back at the 2007 and 2008 period and topping process via several charts as published below:

2008 Daily Impulse Cycles

2008 Daily Impulse Cycles

2008 Weekly Impulse Cycles

2008 Weekly Impulse Cycles

2015 mcm Hindenburg Omens

2015 mcm Hindenburg Omens

From our post regarding the Janurary Effect in May 2015:

The 2015 January Effect: Status – On Track

Early in the year, we decided to do the most thorough study of all the behavioral and market structures possible to confirm or deny the veracity of the January effect. The resulting study produced the "MCM January Effect Model" with very interesting and powerful results.

The chart shown below puts a dim light on the outcome of this year. The rest of the report produced rather stunning results and to our surprise, proved that using a structured approach to a January effect could reveal market behavioral tendencies that are WAY beyond question concerning validity. Some data outcomes produced 96% win or loss rates with 60 to 70 plus qualifiers in the samples. This means 57 to 67 valid winners/losers out of 60 to 70 fulfilling observations.

This report is being refactored and will be available to members when that process is complete. Meanwhile, the data shown below sheds interesting color on 2015. Though there are a low number of observations out of 100+ samples, the methodology we used we feel is highly reliable which makes these outcomes something not to be taken lightly. Ideal turn timing is mid June to mid July.

So far, the year is tracking all the expectations pretty much as posted on these pages. Note that we have been consistent, not flipping our analysis since our first posts this year. We believe this is a significant difference from most analysis work that we have observed. The reason we are pointing this out is NOT that we need to take credit for acurate analysis during a challenging time for the markets as well as analysts - but rather because the advantages of objective, non-traditional data and structure centric analysis provides more relevant and valuable answers - it's just that simple. Even if such analysis is incorrect, its is still highly relevant because, as a basis, objective, and "fact-based" probabilities can be assessed. Failure to achieve them can be as important as achieving the probabilistic outcomes.

We have consistently posted the mcm-Smart Money Indexes, which have continued to deteriorate and most currently sit at 2009 lows - this is a decidedly troubling and challenging hurdle for the markets to heal as there has been a vicious sell-off going on for much longer than headline prices would seem to indicate.  (see:Drama in the Market Seas and Eye of the Storm: Smart Money Indexes Obliterated)

mcm Smart Money Indexes

mcm Smart Money Indexes

Currently, market facts are NOT FAVORABLE near-term and do not turn for several weeks.

The larger patterns hearken to rhyme with 2007 and 2008 and most certainly call for heightened caution. Central Banking may now have to start focusing on other issues than propping up the stock markets prior to their voyages into destabilizing negative equity as referenced in our IMAGINARY NUMBERS series.

If the impulses that appear to be setting up gain traction there could be quite a lot of damage done in a short amount of time. The primary hope for markets is to bounce NOW to better test the cyan impulse cycle breakdowns or they will most likely require weeks of downward price movement to dissipate downward energy sufficiently as to be able start a better recovery attempt. This is also supported by MSP directional projection probabilities suggesting that after mid-month in October the market is likely try to find footing for a significant upwards effort. Below are current impulses cycles that have been setting up:

2015 Weekly Impulse Cycles

2015 Weekly Impulse Cycles

2015 Daily Impulse Cycles

2015 Daily Impulse Cycles

 

Today’s Short-Term Projections – Squeeze

There was a high probability 3:30 AM timing window today. However, this timing and market structure was not respected so far this AM and additionally the move overnight was too strong for such a structure. Impulses on short-term charts and potential emerging ones one medium term charts suggest move may need some time to metabolize. Yesterday, followed projections nearly exactly - with the low triggering around mid-day as posted in real-time in the lounge and contrasting bearish views expecting breaks to new lows. Presently, it is time for bears to be careful for a few days.

September 25th, 2015 Intraday Market Structure Projections

September 25th, 2015 Intraday Market Structure Projections

DAX – Tick Tools Show the Way in a near 500 Point Drop

Yesterday was a horrid day for DAX. It went up in the morning, when the futures opened and surpassed the 10.000 mark. Actual high was 10.019. And from there it went in a vicious decline to put in a daily low at 9.559. That’s 460 points in just one day!

Now anyone with access to the tools would have been forewarned to pay attention when it counted - at the 10.000 mark. As can be seen, 10.000 was highlighted with a buy X-treme and an X-tick to boot (on v-tick chart). When the market made the high above 10.000, a capitulation bar appeared. Now that’s a dangerous triple combo. And when the market reversed without the moving average getting a chance to get above that buy X, it was a clear sign that market was putting in an important pivot there.

Yet another sign to be cautious on the long side was that the market was still impulsing down on the 15-min and 60-min cycle - from the 10.100 area. And the 60min chart showed a bearish retracement signal at 10.019, which was the high of the day.

Just a regular day in the life of the dax tick tools...

vtick

V-tick chart

60min

60min chart

15min

15 Minute Cycle Chart

“Nightmare on Wall Street”? Projections Suggest Highly Negative Period Dead Ahead

As discussed on these pages for months, the week of the 21st was likely to be a lower high and also likely to open up a pronounced period of weakness. The projection turn-window appears to have been left-translated - meaning occurring early in the timing window rather than middle or later regions of it. There is still a relatively low possibility the market can try to hold up into sometime next week, however, on a short term basis MSP suggests market stabilization or even bounce attempt into early Monday morning but that overall session into the cash close should have higher than normal bias toward weak price action  If such a scenario is the case, it would likely be difficult for the market to recover from, which is why it is most likely that a left translated turn has occurred. When we made suggestions relating to this structure, it was well before the market's initial foray into August 24th lows and knowledge of how strong an expected drop into the area of August 21st would be. We had expected significant weakness into the 21st, but not particularly a crash - but nonetheless the tool-set and resources and guidance at mcm was exemplary and conservative.

As implied by the mcm data (many charts posted on these pages), the drop into August 24th was NOT a bottom or even capitulatory - it was a more likely breakout to the downside. Almost all of our systems have switched to a bear market bias after being bull market biased since 2011 and primarily looking for long during this period. NOW THEY ARE FOCUSED ON SELLING STRENGTH and sold the recent bounce into the MSP reversal timing. What is now suggested via market structure projection is what could become an extended period (3 to 4 weeks) of pronounced weakness into October with high probability that the August 24th lows are breached - most likely significantly. As the European markets are leading this decline we are presenting the MSP picture via the DAX - but the S&P500 picture is very similar. Please note, that a break of the 1820 on the S&P500 cash could open the floodgates if it so wishes and bring into focus targets from the 1680's to 1620's. The area below 1820 has quite limited and thin support and does not see more solid potential until the 1600's somewhere. Either way this is NOT your grandmother's market it's a liquidity trap of epic proportions, so, regardless of projections or any other trading approach, great care is currently warranted.

DAX Daily Daily and Weekly Market Structure Projections

DAX Daily and Weekly Market Structure Projections

Being aware of the pronounced risk potential ahead, we have done several webinars to present methods to effectively and objectively participate in what can become violent maneuvers ahead. In that light we did a seminar on more details regarding impulse trading and handling of violence in the markets. It was a long webinar, but we think pretty effective in communicating and transmitting learning and some techniques that we feel can help overcome emotional stresses and haphazard risk-taking. We invite you to watch the recording of the event at: Click here for the videoThe video is free and we hope you may find it of value. We would like to thank the people who spent time with us this weekend and look forward to scheduling another event at some point in the not distant future.

eMotional Volume Histogram – How to Use It

Members are certainly seeing the histograms updating on the bottom of the cycle charts - but for the most part just as certainly ignoring them. These bars contain unprecedented information if you are looking to pinpoint times that a higher degree of risk in one direction or another exists. Interestingly there are several setups which are emminently recognizable that help to understand when psychology is shifting on the short-term and even medium-term (via long-time frame cycle charts). The eMotional Volume bars are also helpful in determining whether a retest of inpulse cycle break is a high probability reversal or not. This is a subject for our upcoming webinar too.

eMotional Volume Histograms

eMotional Volume Histograms

mcm “Applied Cycle Impulses, Applied eMotional Impulses – Volatile Markets” Proposed Webinar 2

Applied Cycle & eMotional Impulses

eTickTools Additions Detail

eTickTools Impulses Detail

Identifying Impulses Down

Identifying Cycle Impulses Down

Previously we scheduled an initial webinar to discuss the nature of impulses - both eMotional and Cyclic in regards to trading volatile or even crashing markets: Crash Potential and Techniques to Trade one . We wanted to offer a follow-up webinar and discussion. We are happy to have resolved the technical issues with the webinar tool that we wanted to use previously. So, this should be a high quality and highly interactive experience once it is scheduled. We are putting the Webinar scheduling and attendance to a vote.

The webinar will be free and will be an interactive Q&A format when it is scheduled. We are seeking to get a near-term slot assigned that is convenient to as many people as possible. Our goal is to assist in helping users to find techniques to identify, take advantage, manage and prosper from unexpected shocks or dislocations and emotionally charged market environments.

Below is a vote. Please choose the times that work best for you and supply your email address and we will update you on the final scheduling of the webinar. All the times are quoted in Eastern Standard Time (New York). Also, note you can become  a registered user for our site and vote which will make it easier to sign up for the event once it is scheduled. Registering will be free.


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Scheduling options for the "Applied Cycle Impulses, Applied eMotional Impulses - Volatile Markets Webinar 2 - follow up", when would be your preferred timing?


 

Restrained Market Emotions Corroborate August Drop as Likely Downside Breakout

The VIX is a very dubious measure of emotion.

  • Firstly, it is subject to intense manipulation.
  • Secondly, it only reflects panic on drops.
  • Thirdly, euphoric behavior or panic at tops is not reflected or reliable in any form.

For these reasons, mcm eMotion and market fact analysis tools are much more insightful and reliable. What we can see from the chart below is that the markets are in frail shape and still bullish biased (via orange running cash inflow/outflow) - likely to the detriment of those bulls over the short to near-term. Signs of underlying bullishness will likely fight a good fight and remain as markets drop in the future. However, downside breakouts of emotion triggered hard well before the August weakness as can be seen below [4]. Ironically, emotional commitment on this bounce as well as commitment via funds being allocated to equities are mediocre to average at best...also, shown below [3 and 5]. While people may want to assume that the August drop was capitulatory, share directionality [2] and cash withdrawn from markets on daily basis [1] certainly reflect that illusion. These are in fact, more than likely breakouts and signs of much more to come. The reasons for this is the comparative low emotional fear and panic at the recent lows and the low eMotion and commitment to the current bounce. 

mcm Accumulation Index Components

mcm Accumulation Index Components

Note the nearing breakdown below 2009 lows of the mcm Smart-Money Index, the mcm Market Open Index and the mcm Market Close Index. Given the nature of these indexes, they suggest low balances in investor accounts and thus high leverage in the markets and a breakdown could cause dramatic stresses on the markets system as well as the financial system in general.

mcm Indexes and mcm Smart Money Index

mcm Indexes and mcm Smart Money Index

Intraday Projections: September 11th weakness

Yesterday the markers deviated significantly from structural behavior. Perhaps contract roll for futures contributed to this. We published to this deviation potential live in the "Lounge"early in the morning when the markets should have continued their down movement "This bounce should not be happening here via timing and market structure - we are covering shorts for break even. Lots of small trade shorts are occurring while much larger buys are occurring which suggests retail shorts are likely to get run over" was what was posted around 10:30 AM. This is an example of how knowing what the structure of market can be as valuable when it complies as when it does not. Significant deviation from market structure is an early sign to expect the unexpected. Combined with multi-disciplinary analysis such as the exceptional signals from the mcm-Indexes and the eTickTools, we had actionable early insight into the day's developments.

Today there are no particularly bullish outcomes probable for the day session. However, please remember that the markets are being applied strong drugs and are highly susceptible to erratic unstructured behavior.  Keep in mind, weekly projections suggest a sharp upward push soon so keep an eye peeled for the start of any upward momentum...such a move could end up being pronounced.

Note, today is September 11th. Having lived through the 9/11 event directly and personally please take a moment in tribute to this terrible event.

September 11th, 2015 Intraday Market Structure Projections

September 11th, 2015 Intraday Market Structure Projections

Character of a Composite Day in September

Below is a composite of the net character of all September Biased Market Structure. Each day is netted out to just one imaginary day for each of the databases: 24 QE Era data (Magenta), Inverse Market Structure (Cyan), 20 Year Market Structure (Red) and Bear Market Structure (Gold). What we can see is that if any progress is made in September it generally happens in short bursts of strong days and more than likely very strong overnight sessions. Other than that the general tendency is towards weakness during the day session. Highs like to form int he pre-market between 3:00 AM and 6:00 AM EST and lows like to form in the afternoon in the 1:00 PM to 2:00 PM timing. So, this makes the pulse of the market in September orient around a timing window of 5:00 AM and 1:30 PM with generally only two timing points. This is unusual as it is more usual to have three. However, these structures may be quite useful for trading the rest of the month. We will post additional details for members.

September 2015 COMPOSITE Intraday Market Structure Projections

September 2015 COMPOSITE Intraday Market Structure Projections

Intraday Projections: This is Your Market on Drugs

Yesterday we indicated in "the lounge" that either early AM highs were dominant and likely to lead to closing near the lows. A bounce into the Open would likely lead to opening highs with a reactionary drop into midday area and strength in the afternoon. The anticipated bounce are mid-day was attempted but failed and reverted highest probabilities to the former scenario. Today is again another similar session - however with less upward potential organically. Therefore, be alert for AM highs and potential stabilization attempt into the noon area once again. If noon stabilization or bounce attempt fails then it is likely again that market may be leaning towards a weak afternoon once more.

As a note of reminder, the reason we made such a large effort to educate regarding impulsive cycle and eTickTool Extreme breaks was specifically because the market is on drugs, as it were, and may go on wild trips. Please continue to pay attention to the impulses with a keen eye and feel free to ask any questions regarding identifying them. Yesterday's impulses that nested up were tremendous as were the impulses that nested down and suggested that a downside risk was not insubstantial.

Also, note yesterday had positive buying via large share trades as shown via our cash add and withdrawn index. Once the intervention attempts were overwhelmed by the apparent advance knowledge of Brazil (emerging markets downgrade)and China Yuan devaluation, this index went negative for the first time during the day and risks also turned decidedly adverse for a larger bounce. This index is very important and an easy way to spot successful or failing intervention attempts or for that matter convicted buying or selling by institutions.

We would like to remind that the weekly MSP propensity is, as we see it, currently in a period of large volatility chop/consolidation and requires a break or failure. We feel that the most likely scenario remains a break to the upside somewhere in the vicinity of the week of the 21st which then fails into a 5 to 6-week downward bias. It is easy to get bearish too early while it appears that the market has work to do.

September 10th, 2015 Intraday Market Structure Projections

September 10th, 2015 Intraday Market Structure Projections