MCM Market Update For The Week of October 9, 2016

The market continued to move sideways over the past week and despite the rather big intra-day fluctuations, remained range bound.

Considering such action, it's no surprise that no real development was registered on the weekly cycles. As previously mentioned the potential of a successful back-test of the 2105 break-out level is still there, but it's not a given at this point. The directionality tool continues to head down which is another warning that the market is not decisively bullish just yet.

Weekly Cycles

Weekly Cycles

The interesting development last week came from the daily cycles. After getting a 3rd END resistance on ES 2 weeks ago and marking the end to the up impulse, this past week YM triggered a bearish retrace (BR) of its down impulse. This BR is very close to the break-down level, which gives it higher than normal odds of holding. So the normal expectation is for some down movement, at least until the market can trigger and END support.

Daily Cycles

Daily Cycles

Turning to the Elliott Wave analysis, the preferred path lows still continue to hold on the NYSE Composite.  Price remained range bound for the duration of the week as buyers and sellers jockey for perceived trend direction.  A new development in the chart is the exit of price from the lower bound.  While this in itself is not an invalidation of the ending diagonal, it serves as a warning that buyers may not be willing to maintain the structure and a swift drop to the lower dotted cyan target path could take place.

NYSE Composite

NYSE Composite

Below is a zoomed in version of the current price action and the potential near term paths that we can take.  First is the dotted white  path structurally known in Elliott Wave as an expanded flat where the final leg returns near the point of origin of the correction start point before continuing on the impulsive path.  In this case down towards symmetry.  Path number two, the solid white path is known as a bear nest where bunching in trend takes place before a full release of the potential energy in the structure is unwound.  This particular structure has the potential to go far beyond the symmetry point towards lower Fibonacci targets.  Lastly is the cyan option which is known as an ending diagonal in Elliott Wave, or a falling wedge in traditional technical analysis.  While the paths vary greatly overall, the common theme between them is there should be at least one more low before the potential for a more sustained rally could ensue.  We will monitor this chart throughout the week in the Expert Lounge to see which path is tracking the best and what the potential outcomes for that path imply.

NYSE Composite Short Term

NYSE Composite Short Term

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply