Immediate Future is NOT favorable for BULLS

This is a quick post to show a variety of MSP charts. All of which point to the immediate area and immediate timing is the beginning of an episode that lasts for several months. There course will be bounces in this decline from our present inflection point. Towards the end of January and towards the end of February or two points to look for bounces in a larger rally in March. Meanwhile, back to business at hand, below are charts of the current detail and close up view for the S&P500, also some overview that shows a preponderance of probability also converging presently as per totally independently calculated MSP for the DAX and Russell 2000.

Happy New Year and wishing you a healthy, happy, safe and prosperous 2016.

Daily/Weekly MSP Close up for S&P500

Daily/Weekly MSP Close up for S&P500

Daily/Weekly MSP German DAX

Daily/Weekly MSP German DAX

Daily/Weekly MSP Russell 2000

Daily/Weekly MSP Russell 2000

 

MCM Newsletter – Outlook for Week 28 Dec – 1 Jan

Executive Summary:
Main Trend (weekly): neutral
Intermediate Trend (daily): neutral
- Short-Term Trend (60min&135min): up

Details:
The weekly cycles are still just oscillating after bouncing from the move lower from resistances (at 2110.5 ES and 17907 YM). As previously stated, the normal expectation is that market will head lower until a new support level is triggered. Interesting is that the directionality tool continued to turn and head lower and YM also triggered a LRE (lower risk entry) for shorts last week. One additional interesting aspect is that price is now at the predictive pivot level, which would satisfy the bounce expectation, if that is all the move from the lows was.

weekly_27.12.

Weekly Cycles

On the daily cycles, both YM and ES respected the support level triggered and bounced. ES is still in the up impulse, which could be close to unwinding, while YM reversed the up impulse and is now just oscillating. YM also triggered LRE for shorts at these levels, just like on the weekly cycle, and is also right at the predictive pivot.

daily_27.12.

Daily Cycles

The 60 and 135min cycles both started impulses up, after having unwinded the down impulses. 60min already had a BR and an END and now put in another support at 48 (point 1 on the chart). 135min didn’t start the unwinding however the directionality tool started to move down (point 2 on the chart). Near term it is important to watch if the 48 support will hold. If it doesn’t the next level to watch would be the 21 level on 135min or if we get a support level triggered.

60&135_27.12.

60 and 135min Cycles

Happy Holidays & Market Projection Update

We wish you a Merry Christmas and happy holidays and a successful 2016 to come. 2015 has been an interesting year for MCM and we will do a review of our successes and failures things with improved, and weaknesses and strengths. Overall, as can be seen from the chart below market structure projection has been one of the strengths, and it has successfully projected the market out for many months now. These projections have not changed as they are rendered in the charts and remain relevant to market behavior. Weakness projected into [5] bounced as expected and began the latter part of a Santa Claus rally. The strength of the drop that occurred last week did not fit into the resolution of the weekly projections. However, if you do look at the daily projections which are the white lines at the bottom the chart you can see the morning to morning weakness that showed up during those days. Again, these renderings have not changed and remain relevant. This coming week as a potential to be a pronounced decline. For the January effect for this year, the average closing gain for the year is -9% or so. While we may not reach -9% next week has the potential to take us significantly towards this direction and caution would be advisable. This is certainly NOT an options being presently seen in popularity on the internet as most Elliott wave and technical analysts are distracted with triangles which in this analyst's option are way too obvious and accepted to follow expectations easily.

S&P500 Daily and Weekly Market Structure Projections

S&P500 Daily and Weekly Market Structure Projections

Again, we wish you a very merry and safe Christmas and look forward to seeing you in the new year. Please come back to see our year-end review mentioned earlier in this post which will be posted soon.

MCM Newsletter – Outlook for Week 21-25 Nov

Executive Summary:
Main Trend (weekly): neutral
Intermediate Trend (daily): neutral
Short-Term Trend (60min&135min): down 

Details:
Nothing significant to report on the weekly cycles. They are currently oscillating and are starting to move lower from resistances (at 2110.5 ES and 17907 YM). The normal expectation is still that market will head lower until a new support level is triggered. Interesting is that also the directionality tool started to turn and head lower.

weekly_20.12.

Weekly Cycles

On the daily cycles, YM actually reversed its upward impulse by having resistance  trigger below the break-out level. ES had a BR and an END, which means it could have finished unwinding its impulse up. Last week it triggered a support level at 1983 which led to a strong bounce (helped by the FED day), but then the market came back down and is now close to the support level again. Considering that both ES and YM are close to their recent support, the behavior here is critical for the intermediate term direction. A bounce is the normal expectation, but if the market cannot sustain that bounce and we break below that could start another impulse down which could take the market to much lower levels.

daily_20.12.

Daily Cycles

The 60 and 135min cycles had an interesting week. Both started impulses up (point 1 on the chart), but couldn’t sustain the upward movement. 60min had a BR support trigger at 2037, which was broken below and thus reversed the impulse up by starting an impulse down (point 2 on the chart). 135min simply reversed its upward impulse and had support trigger only below as a 2nd END of its down impulse. However that support was also broken (point 3 on the chart). The new nested impulse down on 135 is not confirmed yet, since MA did not cross-over. But if the market doesn’t bounce, more or less immediately, it will. Breaking into (new) down impulses on both timeframes, at a time in which also the daily could start the same, would be very bearish. It remains to be seen if a bounce is coming on Monday or we move lower directly.

60&135_20.12.

60 & 135 min Cycles

Yellen - Why Is It Not Working?

FED Speak, FED Hike, FED Squawk – Some Disccusion

Yesterday we posted these comments regarding the FED:

Another anecdotal issue is that the FED is due to report their unbelievably tortured analysis and process geared to raise interest rates by only 25 basis points. However, at this point the FED credibility is pretty tattered and IF they raise interest rates they will be viewed as non-data dependent to the contrary of their propaganda. If they do not raise interest rates they will be show that the verity of their analysis and policies is likely sorely lacking. In either case, the best the FED can do is damage their credibility or damage it more. Not particularly wonderful outcomes and for the markets this could imply that no matter what the FED does will be received negatively.

Yellen - Why Is It Not Working?

Yellen?

It is worth noting that if things get too challenging in the markets, the Fed may decide not only "no hike" but QE and effectively "rate cut". This woul be data driven of course and all in the span of less than 2 weeks of data. The question is would any new QE solve the problem? While there is no reason to doubt that a rally on some QE announcement would occur, the problem is that we are facing liquidations of malinvestments. As in 2010, after the initial rally in equities, QE funds and liquidity sought an avenue for allocation - the chosen allocation was not previous dubious products - and did not immediately go into equities or bonds - it went into commodities.  This caused dislocation in the commodities markets with many commodities rising hundreds of percent in a very short time - which in turn caused the "Arab Spring" (which was no "spring" but rather a revolt by starving citizens) as many poor and middle-class Middle Eastern people were unable to afford necessities of rice and other foods. They were forced to choose between buying food or paying rent. Similarly, were sitting in the situation in which junk bonds need to be liquidated and QE liquidity would not be allocated easily to junk at this time. Therefore, the only option for the Fed, which this analyst feels would further damage their credibility, would be for the Fed to directly purchase declining assets and junk bonds. Certainly, the FED can purchase junk bonds and represent them on a portfolio at par as they have done with many of the bankrupt entity debt that that they purchased in 2008 and 2009 (Maiden Lane III Portfolio) - but this does not inspire confidence.

So, in summary, it appears that if damage becomes pronounced to the equity and debt markets now or int he future theFed may need to attempt to directly arrest it. However, their tools are not precise and not effective. Moreover, they would be seeing as hypocritical because how could they not see this coming, and, in fact, want to do a rate hike just before major damage to bond and equity markets would occur. Either way, the situation as it seems to this analyst, is a no-win outcome for the Fed, no matter what they do. The best probable scenario that likely exists is that the Fed just buys every asset that is going down and attempts to arrest decline by increasing the balance sheet further and also deteriorating its quality.

Is it really possible, that if these options are even on the table? And would they work or make a difference for more than a short time?

Weekly Cycles Are Just Turning – Needing Time to Resolve

Last week was a tough week for risk assets as expected. The next few days are key as ideally timing for a bounce exists this coming week it is possible, however, this cycle inflection point can right translate and a turn from down to up may require more time. The reason for this is that we are now in the acceleration phase of double downward running correction breakouts. On a conservative basis, timing should be for Tuesday or Wednesday for a low. However a caveat implies that those "short" should consider trailing stops down rather than exiting shorts on any further weakness. Below is a chart of the weekly cycles - the turn has only just begun as per the rejection of the magenta resistance cycle - additionally, the cycle direction study is only just now beginning its reversal downwards and will require, at a minimum, a few weeks to reach the zero bound (See [1] and [2] on the chart). There will likely be bounces within any such move however, it appears that the market can easily reach the running correction targets of 1,940 or 1,800.

Another anecdotal issue is that the FED is due to report their unbelievably tortured analysis and process geared to raise interest rates by only 25 basis points. However, at this point the FED credibility is pretty tattered and IF they raise interest rates they will be viewed as non-data dependent to the contrary of their propaganda. If they do not raise interest rates they will be show that the verity of their analysis and policies is likely sorely lacking. In either case, the best the FED can do is damage their credibility or damage it more. Not particularly wonderful outcomes and for the markets this could imply that no matter what the FED does will be received negatively.

Weekly Cycles

Weekly Cycles

While we do not have sufficient data to build complete MSP on the HIGH YIELD asset class, there are some worthwhile observations which could be troublesome. While we are not comfortable with MSP setup for HighYield enough to publish it - here are some general observations: market structure projection on a broad basis pointed to normal probabilities starting last week into the Christmas time as among the most positive of the year. This is interesting, because when something deviates significantly from MSP then it's often likely something serious is going on. So far. is that is appears people were attempting to be set up for this potential strong upward move for HighYield and are presently getting stopped out. When people get trapped in trades and the market does not cooperate, things can often go as strongly opposite as they would be expected via MSP to go based on probability because people are caught by surprise. Technically, the MSP setup bullish for HighYield into Christmas, however, IF we have inverted and turned buyers into trapped sellers hungry to get out - then it is possible weakness can continue in HighYield until Christmas. We currently appear to be contradicting the probability projections of MSP for strength for HighYield - this could be A BIG PROBLEM if participants become trapped.

MCM Newsletter – Outlook for Week 14-18 Nov

Executive Summary:
Main Trend (weekly): neutral
Intermediate Trend (daily): up/neutral
Short-Term Trend (60min&135min): down 

Details:
Nothing new to report on the weekly cycles. They are currently oscillating and the recent test of resistances (at 2110.5 ES and 17907 YMtriggered a more pronounced down move. As previously mentioned, the normal expectation is for market to head lower until new support level is triggered. That however may happen at much lower levels.

weekly_13.12.

Weekly Cycles

On the daily cycles it is interesting that ES behaved a bit differently than YM. ES had a BR and an END, which means it could have finished unwinding its impulse up. Especially since now it is a bit below the previous break-out level (point 1 on the chart). YM did not get any BR yet and is now back-testing for the 2nd time the break-out level (point 2 on the chart). The previous time that back-test triggered a strong upward reaction, however now that is no longer the normal expectation, given the development on ES. In any case the 17100 level is important to watch. Breaking below would reverse the up impulse and add weight to the conclusion that ES indeed finished unwinding it’s up impulse. If the back-test holds again, then ES might trigger a new BR support level and require a 2nd END higher.

daily_13.12.

Daily Cycles

The 60 and 135min cycles had a busy week once again. Both started impulses down (point 1 and 2 on the chart), and after briefly spiking above the break-down level, started a stronger down move. What is interesting is that both had BR and ENDs trigger and that the support level of the ENDs has been broken (point 3 on the chart). The new (nested) impulse down is not confirmed yet, since the MA didn’t cross the break-down level, but if the market heads lower, they will. If that happens, that would be very bearish and the market could start to accelerate to the downside.

60&135_13.12.

60 & 135min Cycles

 

Projections for Bounce Sometime Next Week in DAX

The DAX market has tracked MSP well and is looking for an interim balance into Christmas starting sometime next week. As has been posted throughout these pages by breaking below extremely strong capitulatory emotional selling extremes (X-Ticks) via eTickTools on a pervasive basis the markets triggered behavior unlike any that we have seen since before the August crash - putting it at potentially grave risk. IF NO BOUNCE OCCURS NEXT WEEK THEN THE IMPLICATIONS ARE DIRE. This has serious implications for the US markets as well as the DAX tends to lead the US equity markets and S&P500. It is, therefore, with the most concern and hope that we look for the markets to reward the low liquidity seasonality into Christmas with a win. However, the negatives are also pervasive in that NO analyst we see is really looking at anything other than upward triangles, falling wedges and wave 4's. We do not believe the equity market as a whole will be seeing new highs anytime soon - contrary to the very bullish general expectations it seems in the analyst space.

DAX Market Structrue Projection

DAX Market Structure Projection

Potential Running Correction Could Setup Framework for Accelleration

In an ominous potential for the Christmas Season, a potential downward acceleration pattern is setting up. The same pattern preceded the August decline and also a positive running correction triggered in October. When even the whiff of a running correction appears, it is something to pay attention to because the next move is not likely to dilly dally if the pattern confirms. This post is not to put the odds on such a breakdown, however, it is something to be noted. The market has a short time before it reaches MSP timing for a bounce, so the appearance of this potential pattern could be quite important. If we break back over the magenta resistance line then the pattern is likely invalidated. However, this is an important pattern whenever is raises even the possibility of its potential because they are very effective at confusing technical analysts and Elliot wave analysts into the most optimistic patterns in the opposite direction which serves to trap the most people and therefore, provides potential acceleration as people get stuck in those wildly optimistic assumptions, in this case, upward assumptions. Also, keep in mind that often running corrections are often a sign of emerging structural issues in the market that are beyond normal stresses - such as liquidity or liquidation stresses, interbank or systemic stresses.

Note, there is no requirement for the upper resistance to be duly tested - focus needs to be on the support line/break IF one were to occur which is not preordained.

S&P500 Potential Running Correction

S&P500 Potential Running Correction