MCM Newsletter – Outlook for Week 22 – 26 Aug

Executive Summary:
Main Trend (weekly): neutral
Intermediate Trend (daily): up
Short-Term Trend (480&288min): up
Details:
The weekly cycles are in an interesting position, as ES is close to confirming the up impulse, while YM is still a few weeks away from that. The mcm-MA on ES is now crossing the resistance level and even if YM is under-performing, both markets have moved enough above the resistance levels to rule out a mere spike above. If it would not be for the structure of the daily cycles, a prolonged up move as a result of this impulse would be normal expectation.

Weekly Cycles

Weekly Cycles

On the daily cycles, we had a significant event last week. YM had triggered a new support level just below the 2nd END resistance and on Friday, it triggered the 3rd END resistance to that support, marking the complete unwind of the massive up impulse which started close to 16,500. That is a very important level and because it is a 3rd END resistance, it has lower than normal odds of being broken above. The up energy of this impulse fully dissipated at this level, and the normal expectation is for a move in the opposite direction (i.e.down). ES is in a slightly different position since it never triggered the 3rd support and END higher, as the market never moved back below the 2nd END resistance after moving slightly above it. However the market never moved significantly above that resistance level, so coming back below it would not be surprising. The terminal status of the up move on the daily is what makes unlikely the start of a true impulse on weekly, despite the near confirmation on ES. However, if the daily cycles manage to break the resistance levels against the odds and start a nested impulse up, that would be a very big warning that a new big up move is coming, since we would have impulses up on daily and on weekly. So how the daily cycles shape up becomes key for defining the intermediate term direction.

Daily Cycles

Daily Cycles

480 and 288min cycles are still in the area of the plateau which we were mentioning last week, although the market did manage to make a 2-3 points higher high. 288 is in the unwind phase of a new up impulse and already had a 2nd END resistance very close the the highs. 480min had a BR support very close to the break-out level of the nested impulse up, which gave it higher than normal odds of holding; which it has done so far and we are looking at the next END resistance (higher) to mark a potentially significant turning point.

288&480min Cycles

288&480min Cycles

Major Support Dead Ahead – If Broken Support is Virtually Nonexistent Till the 1600’s

MSP, as usual, has done a great job of timing out the market cycles. The next inflection point is projected for around the 22nd of January. Meanwhile we have reverted to BEAR MARKET microstructure on the short term MSP additionally we have a critical set of supports coming up with thin zones directly below them. If these supports break near-term the event brings the potential for lower levels to be reached within the MSP inflection point.

Emotionally, the market is NOT in good shape and lots of cash has been extracted from the market on selling days and this has NOT been replenished on buying days. These are consequences of unbridled gambling by the FED directed global central bank cartel system

No matter the case, we remain extra cautious or short-biased bounces in the near-term till we have the potential for a larger inflection point.

As per the "mcm Real January Effect" we have been tracking since the first two days for the year and confirmed with the first-week market structure and then finally this weeks market structure some pronounced negative company in terms the "Real January Effect" outcomes which presently suggest a interim low in March with yearly lows in October or November. Potential Intra year drawdown is up to 45% if the market confirms these market structures with its January close.

Careful out there.

mcm MSP Projection as Published in Aug/Sept

mcm MSP Projection as Published in Aug/Sept

mcm- MSP Proejctions Actual to Projection Comparison

mcm- MSP Projections Actual to Projection Comparison

S&P500 Levels chart

S&P500 Levels chart

S&P500 Historical Emotional Extremes chart

S&P500 Historical Emotional Extremes chart

mcm Accumulation Components Indexes

mcm Accumulation Components Indexes

 

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

Looking into the Eyes of the Adversary

Below is a detailed look at the antics the market threw out yesterday. the Cycle Impulses were fantastic yesterday but market emotions were a bit fractured. We wanted to show some details on how to use the tools available in eTickTools to diagnose the adversary. It is a VERY detailed view and something you will probably want to open into a full image and zoom in - the image is very large (not to mention not easy to make) so be aware it may not be easily legible till you zoom in one-to-one.

We are very interested in feedback on this and open to doing a new webinar if there is sufficient interest.

Click this link to pop up a separate window with a full res image. You can right click on the link or image and choose to open in a new window or you can download it.

eTick Tools - Looking into the Eyes of the Adversary - a very detailed look

eTick Tools - Looking into the Eyes of the Adversary - a very detailed look

Market Flux Capacitor in Overdrive – Crash Potential and Techniques to Trade One

Last week we posted a definitive warning that something was aberrant and dangerous in this post: Market consciousnesses running through a flux capacitor. MSP is suggesting a bounce to an early September week one peak. While this remains the highest probability given that DAX and Eurostoxx both show reversal windows on weekly MSP starting this week, these are unprecedented times and as the example in the referenced post states: The market not following its metronome or market structure is very similar to hitting the brake in an automobile with the reaction of accelerating rather than slowing...things are clearly aberrant for what could be a variety of reasons - all of which need to be taken very seriously. A car should slow with a depression fo the brake and similarly the market should slow and react when it reaches its market structure metronome let alone support as in the 2044 area mentioned extensively last week. All reasonable expectations argued for, at the least, a short few day pause or test there, the overrunning of the infection forces, similarly to the eTickTools concept, suggests that the professionals professional was getting run over. Either way I am quite sure that there are a lot of people wishing they traded aggressively to sell a dangerous setup and there are quite a lot more people who are frantic about having bought all the way down. The approach for mcm is, was and continues to be since our post about taking a trading break as opposed to getting blindsided by low probability and risky setups, that the highest probability trades are yet to come and occur in September. That is still the case, a bounce in week 1 of September will likely be at the least a high probability reversal point and a second one towards September 21st. In all of the trading systems we have authored, a characteristic of any market turn is the highest opportunity is NOT when the turn occurs and the breakdown appears but after - and that is our calm and considered assessment presently too. These systems rarely trade the actual turn but rather focus on harvesting the subsequent larger move. We feel that if traders approach this market attempting to harvest this move aggressively - especially without the proper tools, funds are likely to be depleted by the time the real tradable market reveals. For these reasons, we emphasized the danger to all and still advise a high degree of caution.

Meantime, the markets are in an intense state of acceleration with the brake pedal fully depressed (not to mention parking brake on) that we felt it important to share some thoughts and setups to trade a crashing market. When the vehicle just will not stop it can be the ground that is moving, and we would be remiss to NOT further examine this subject. So, to make things easier we added some features to the eTickTools analytics toolset and want to take the time to discuss out methods regarding our cycle oscillation toolset. We feel that refocusing on these tools can help to do exactly what they were designed to do, assist in retaining clarity and consistency in all market conditions but especially in powerful momentum markets such as explosive up or down crashes. The objective is to locate risk and rewards inflection points that retain a reasonable and definable risk reward with an understanding of the market framework and psychology. Additionally, the goal is to retain a significantly higher than normal probability.

Below are charts of the additions to eTickTools. Among them, we have sped up the chart streaming, added the historical extreme background support and resistance lines in such a way as to require a minimum amount of cpu as possible. Additionally, we wanted to emphasize the use of Accumulation Index to help determine what market psychology is being conveyed during a consolidation market behavior or near inflection points. Examples are below.

eTickTools Additions

eTickTools Additions

eTickTools Additions Detail

eTickTools Additions Detail

The cycle oscillation toolset are not technically a part of eTickTools, however, a lot of learning has come from them and some similar concepts apply which is why we added the mcm moving average to the eTickTools charts. We wanted to share and discuss a few details regarding using these tools especially during non-cash hours to help identify impulsive moves. The interesting thing about cyclical oscillations, even on short term charts is that they do not act as high-speed signals that need to chop you up...but when used properly they provide insight into market structures that help orient the mindset of the market - for example impulsive and cyclic/counter-trend oscillations. Below are charts that go into more detail.

Identifying Impulses Down

Identifying Impulses Down

Identifying Impulses Up

Identifying Impulses Up

Identifying Impulses Down Overview Chart

Identifying Impulses Down Overview Chart

Up = Down. Down = Up. Welcome The New Paradigm

In addition to the overwhelming pressure on the markets downward as represented in the many structural and other effects noted on these pages...the market internals continue to be absolutely horrid. Currently, we are getting upward price movement on outflows and internals that rival that of 1% to 2% down day point declines...Everyone capiche now? It's a new paradigm!

Thought not!

Horrid Accumulation Index Internals = Bull Market?

Horrid Accumulation Index Internals = Bull Market?

Overview of Today’s e-Tick Tools Intense Emotional Extremes

Below is a chart that references the X-Ticks that were discussed in the previous posts. X-Ticks are VERY important events in that they allow a precise measurement and profiling of the energy and emotions being expended in the markets. Today, was a first. Never having traded through a day that generated the single biggest expenditure of BUY energy in all our sample set of the last 15 to 20 years...we got it. The highest amount of BUY energy ever expended in the markets happened today at 2:45 PM. The key with buy energy is that prices MUST stay above that kind of energy expenditure otherwise its aberrant and likely exhaustion/capitulatory. Currently, after hours we just broke the 100% X-Tick at 2068 and immediately dropped 10 ES points. This presents a potentially very serious issue for the markets (Sorry, I mean central bankers) to overcome.

e-Tick-Tools Review - BIG EMOTION today

e-Tick-Tools Review - BIG EMOTION today

eMotion Index & Accumulation Index at Unsustainable Extremes

Below, for reference, is a historical chart of our proprietary mcm eMotion Index and Accumulation Index plotted for history during of the last years. These indexes offer an unprecedented look into the mind of the markets. The interesting thing about eMotion Index is that is can register very high eMotions near or highs, vastly differently than VIS or other sentiment tools and Accumulation index can show untenable commitment/energy and inefficiency regarding trade quality and executions. The picture is not resolved, but clearly the die is being cast and eMotions are at levels that will likely influence trade for months to come.

The chart below is VERY large please zoom in to see it at full resolution:

eMotion Index & Accumulation Index History

eMotion Index & Accumulation Index History

Market Showing Dramatic Divergence Between Price, Actions & Emotions

Why should we expect the markets to make sense. They clearly rarely do. But that is what both makes them predictable and perplexing. The chart below is showing the mcm Accumulation indexes. Accumulation Index has been unusually strong (top cyan line) while prices have dropped 20 ES points. Additionally only $2.9 billion has been cashed out of US equities which is comparatively little considering the drop. Normally this number should be something like $12 to 15 billion by now. Not only that Trade tickets executing on the Ask or above are 45% greater than trade tickets executing on the bid or below. While the market is down 20 points!!!

Can someone please tell me the name of the central bank panic-buying?

July 2nd, 2015 Intraday Accumulation Index Components Update

July 2nd, 2015 Intraday Accumulation Index Components Update

Reminds me of IMAGINARY NUMBERS!

10:30 AM High Attempt Failed…Bearish Market Structure Continues Tracking

For the record, one of the elements that we attempt and I believe achieve, is market analysis without preconceived bias. Last night pointed to a high on Wednesday daily market structure and also probabilities for one of the strongest momentum days of the week today - usually upward biased. This morning early, before in our expert lounge we lowered the probability of that potential dramatically. This was around 5:00 or 6:00 AM. When something substantive changes, this is one place that is not going to be embarrassed about making the determination promptly and also determining if "EDGE" is compromised. Therefore, the impact of a change in outcome for the market probabilities today for us was of very little impact. It has not been easy to develop this kind of discipline and capability. BUT it is one of the distinct advantages of NOT using indicators and instead using data, statistics and probabilities and combining this with real-time emotional tools such as e-Tick-Tools.

When strongly bullish market structure and probabilities get overrun, often time, market participants get trapped. So, the moves can be as strong in the opposite direction if these participants become disoriented or forced sellers or buyers as the case may be. Therefore, today was and is a potentially important day. It is also, YET ANOTHER good example of using bi-modal decisions to navigate without getting trapped in expectations, opinions or notions.

It was clear in the early morning update that market structure favoring a bullish outcome was no longer highest probability, due to the patterns from 10:00 pm to 3:00 AM. These was a shot at recovering, however, noting all the anecdotal contributors supporting weakness and the importance of performance at 10:30 AM, the market responded in highest probability fashion. Delivering on the BEAR Market MSP probabilities at a 90% correlation. Gap Tools delivered the fill that it anticipated, and that led straight into the 10:30 AM timing. While there, e-Tick-Tools called a capitulatory BUY EXTREME. Which translates to as buying exhaustion. This was NOT confirmed by Accumulation Index, which undermine today's upward movements by showing emotions and execution feedback consistent with selling psychology even at the highs.

This post is not about per se today's outcome, it is about the important to have the humility to adjust to the markets probabilities without hanging onto previous assumptions and expectations.  This afternoon 2:30 PM to 3:00 pm is important as we can consolidate there. Probabilities favor further selling from this consolidation into the close.  3:00 pm is timing, and one should be careful and aware at time windows.

Tick Tools Today  June 24, 2015

Tick Tools Today June 24, 2015