MCM Newsletter – Outlook for the Week 10 – 14 Apr

The market didn’t do much of anything last week, probably trying to prove that sideways is also a direction. We did get a higher high vs the previous week on Wednesday, but still finished the week lower. No change in our EWT (short term) scenarios - we still have a 3 wave correction from the ATH and the current bounce overlapped the 1st wave low, so the current move should continue to new ATHs, unless the bears turn this into a nested move down. The low close to 2320 is the level to beat for bears, while overlapping 2390 would more or less guarantee the bulls that new ATHs are coming.

No change on the weekly cycles. Directionality continues to move lower.

Weekly Cycles

The daily cycles have the bullish retrace (BR) supports in place which have held the decline so far. Directionality is still stuck at the minimum level, so once it bounces we would be on the look-out for an END resistance higher.

Daily Cycles

The 288 and 480min cycles    
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MCM Newsletter – Outlook for the Week 3 – 7 Apr

The last week of March saw the bulls come back from being a bit on the run the week before. Monday saw the market make a new low and spiked below the 50 day MA. However the bulls quickly recovered and not only did they win back the 50 day MA on an intra-day basis but the market rallied the next 3 trading sessions. Only Friday saw the bulls give back a bit. Continuing our EWT (short) analysis, the larger 3 wave correction we were mentioning got the new lows and then rallied, as warned. The rally overlapped the 1st wave low, so unless the bears turn this into a nested move down, the current move should continue to new ATHs.

No real change on the weekly cycles, but an interesting fact - the mcm-MA provided support, just as it did on the daily when it was first tested. Directionality continues it’s move down and would be interesting to see how it behaves going forward.

Weekly Cycles

An important development on the daily cycles: a bullish retrace (BR) support triggered at Monday’s low, adding weight to the assumption that the said low is important. Normally an END resistance higher is expected but for where that might show up we need to take a look at the shorter term cycles.

Daily Cycles

The 288 and 480min cycles    
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MCM Newsletter – Outlook for the Week 27 – 31 Mar

Last week provided the most interesting week in quite a while. For the EWT fans, the classical 3 wave bounce we were mentioning last week proved to be exactly what it seemed. And the market proceeded to resume the main trend (down) with conviction. Tuesday’s drop was impressive with 40 points between top and bottom and the market closing near the lows. Continuing with the EWT interpretations, bigger picture, the decline off the ATH looks like a 3 waver. The 3 wave bounce mentioned before being the B wave of this larger A-B-C correction. The C wave doesn’t look done, so new lows are likely, however from there it is possible that the market rallies again strongly and makes new ATHs if the decline off the ATH is just a 3 wave correction. No way to tell that now, although where the current wave down will finish will provide a good clue.

Due to the strong decline, the weekly cycles had their directionality begin to move down, in a sign that the correction is something more than just a small dent in the up trend. No other signals so far, but we are on the lookout for a potential bullish retrace (BR) support which could trigger.

Weekly Cycles

Same story on the daily cycles. No bullish retrace (BR) support just yet, but directionality is more advanced than on the weekly, having hit its lowest level already and staying there. The initial move of directionality on the daily was a nice signal showing that the decline was not done with the 1st wave down off the ATH.

Daily Cycles

The 288 and 480min cycles    
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MCM Newsletter – Outlook for Week 5 – 9 Dec

After the silent grind higher from 2 weeks ago, which had us question whether it was the calm before the storm, last week didn’t bring the storm just yet. But the market did retreat from the high registered the previous Friday. That high was breached though on Monday and Wednesday on ES and also on the cash index on Wednesday. That seems like a typical flat formation (for those EWT inclined), which would mean that at some point the market would need to take out the ATH once again.
Looking at the cycles the weekly still doesn’t show signs that a turn is in. The slight pullback we had last week was not enough to paint a resistance level on the weekly and it also didn’t change the directionality trend which is still going up.

Weekly Cycles

Weekly Cycles

The daily cycles registered an interesting development. A resistance level triggered also on ES which was more respected than the one which triggered on YM a while back. The market pulled back from there and found support at the mcm-MA. The directionality tool on ES started to move down also, while the one on YM is still at the maximum point. So there are signs that the market is approaching exhaustion, but for the exact turning point to be confirmed we need to look at the shorter timeframe cycles.

Daily Cycles

Daily Cycles

The 288 and 480min cycles show    
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mcm Market Update for Week 44

The action over the past week was decisively bearish. The market continued the downside movement started 2 weeks ago and declined in all 5 trading sessions reaching a 70 points decline in 2 weeks and more than 100 points lower vs. the August and early September peak. Continuing the bearish signs, the market broke decisively below the trend line connecting the last significant lows (the one from February and the one from June). But of course, the real question is: what now? Will the market continue lower or is a bounce in the cards?

Looking at the cycles, we can see the same bearish signs: the weekly support level on ES was broken, despite it having higher odds of holding. YM also broke its support, albeit only marginally (shown on chart). The directionality tool did provide a nice warning that the bounce after the initial decline was not going to hold, by continuing to move lower throughout it. It is currently at the minimum value and if a more significant bounce is coming, it will start moving up. We also have a LRE (lower risk entry) for longs on YM and as we can see in the past (highlighted on chart) these have the potential to trigger a big bounce. A 2nd consecutive one triggering next week will definitely be something to watch for.

Weekly Cycles

Weekly Cycles

As we were mentioning last week, the daily cycles were bearishly inclined and the market delivered just that. YM was in a confirmed impulse down and it had triggered a 2nd bearish retrace (BR) resistance level which normally needed a 2nd END support lower. The market moved decisively lower, so now we are on the look-out for a support level to trigger. ES also triggered (late) a resistance just above the previous support and then a new support lower, which was slightly broken. Going forward it will be important to see when a support level will trigger on YM. That would be a big warning that the decline is at least pausing for a while.

Daily Cycles

Daily Cycles

Revisiting our potential Elliott Wave ending diagonal on the NYSE Composite from previous updates, it is very obvious that we've broken the rising wedge pattern and have begun to sell off.  This brings in a demarcation point where the diagonal structure becomes invalid because in a contracting ending diagonal, wave 2 must remain shorter than wave 4.  We've marked that level where that is no longer the case and at which point we can begin looking for much lower prices as the next viable structure would bottom in the 9600 to 9500 area.  Futures are markedly green at present so a challenge of the upper area of the declining wedging pattern is a relatively good probability at this point.  Good luck this week.

NYSE Composite

NYSE Composite

Technical Lab Update For The Week Of November 6, 2016

While price appears to have departed from historical seasonal, which is understandable considering this election year can be categorized as anything but normal, we'll focus on some levels to be mindful of on the SPX chart.  Twice on Friday price challenged the 2086 Primary Intermediate Level which provided support and price was also rejected at the high of day by the Intermediate Minor Level at 2099.  With the 200DMA and two Primary Intermediate Levels residing in the 2086 to 2073 zone it is to be expected that this area will be substantially supportive barring a gap open on the underside of 2073.  In this gap scenario 2058/59, but more likely 2040 will want to be tested before a bounce back up towards the 200DMA and the underside of 2073.  HAL and RVS still have reasonably sized long positions on and with the confluence of technical and MCM related support just underneath, a price recovery of reasonable magnitude would not be surprising from this general area.

Primary and Intermediate Levels

Primary and Intermediate Levels

Now that we've progressed deep enough into the proposed diagonal pattern we can focus on another aspect that will eliminate it as an option and put the expanded flat firmly on the table.  In an Elliott Wave contracting diagonal the fourth wave must remain shorter than the second wave for the structure to remain valid.  In this case the 2064 level would be that demarcation point.  From there we could focus solely on the lower levels before any sort of bottoming expectations were to take place.  Good luck trading this week and mind mid week for election results because it could make for a bumpy ride.  Trade safe.

SPX

MCM Market update for week 43

Happy Halloween weekend everyone.  This weeks update is going to take a top down approach in an attempt to ground everything and get a good look at the forest and focus a little less on the individual trees that comprise it.  On our run up from the 2009 lows you can see that we've broken from the sustained uptrend at magenta which gave us our first substantial correction since the 2011 lows.  The vast majority of analysts are quick to declare a new trend is under way after a rally or decline begins simply as a function of near term price action.  This is a mistake.  Large trend moves take time to consolidate as expectations change among investors.  These periods last just as long as the trend periods if not longer.  At present, we are about half way through such a period as we traverse across the blue channel from the upper bound to the lower.  Now while the 400 point range from 2200 to 1800 seems massive on an intraday basis, it is relatively minor in the grand scheme of things.  The cyan cross sectional channel is important as we cut across the larger blue channel because it defines price zones.  Maintaining trade above the upper level lets you know that buyers conviction in future prospects of higher prices is strong.  A failure of the upper bound of this channel is a hint that conviction is likely in the process of waning and a larger move back through the previous consolidation zone is likely underway.  Since price has traversed this cyan channel area multiple times in the past it acts as a vacuum because all the levels but the most recent have been broken through and resistance to price change is weak.  With that being said, it is a reasonable assumption that any sustained trade below the upper bound has a high probability of price finding the lower bound in a relatively short period of time before making its next trending longer term decision.

SPXLT

S&P 500

Taking a look at the closer term picture via the cycles, we can see that the market has not decided yet which way it wants to go. The weekly cycles show supports triggered, which have a bounce as normal expectation, while the daily cycles show broken support on ES and a fresh resistance on YM, which point down. The triggered levels on both time frames are critical to watch therefore since whichever break first will likely indicate a bigger move.

The weekly show a change compared to the previous week. The supports which triggered on ES and YM were reset and are now triggered again. This is a very rare occurrence and it happens only when a level (support or resistance) is triggered and something changes at the end of that bar, before confirming, that makes it not confirm. This only appears when the charts are reloaded which is why it was not seen immediately. In any case, the currently triggered support levels do not change the picture. The only difference is that the support triggered by ES is higher and is a bullish retrace (BR), meaning the impulse up is still valid. Also, because it is close to the break-out level it has higher odds of holding, but the conclusion is the same: a bounce is the normal expectation.

Weekly Cycles

Weekly Cycles

As mentioned, the daily cycles are showing exactly the opposite. ES broke it’s support level and although it didn’t break down and the impulse down wasn’t confirmed, it is a sign of weakness. YM is in a confirmed impulse down and it triggered a 2nd bearish retrace (BR) resistance level which normally would need a 2nd END support lower.

Daily Cycles

Daily Cycles

 

mcm Market update for week 42

More sideways action the past week, as the market didn't move much in terms o price, but was again range bound. After putting in a low on Monday, the market gaped up on Tuesday, but the up movement was short lived as the last 2 days of the week saw the market retreating again.

This choppy back and forth finally triggered a change in the weekly cycles - both ES and YM triggered new support levels. This fact has 2 important implications. First, the previous impulse up on ES is reversed, both ES and YM being in normal oscillations now. And 2nd - the new support level is now the critical one to watch. The normal expectation is for the market to move up until a new resistance level is triggered. The directionality tool continues to move down so it will be important to watch how it acts going forward. If the market can’t bounce and the support gets broken directly, that would be very bearish.

Weekly Cycles

Weekly Cycles

The daily cycles also have supports in place. ES did whipsaw its support level, but the market didn’t break down, so a down impulse was not triggered. This also points to up movement as the normal expectation, same as the weekly cycles, and here also the directionality tool is moving up so it would be interesting to see if it continues to do that.

Daily Cycles

Daily Cycles

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

mcm Market Update For Week 39

Another week comes to a close and it seems that volatility is here to stay. All trading sessions had 20+ points from low to high, while the last 2 days had even 30+. Now that's a traders dream if he can be on the right side of the trades.

Coming back to the long term direction, last week didn't bring any significant change in the weekly cycles. The potential of a successful back-test of the 2105 break-out level is still in the cards. The market bounced from there but has yet to really take off which . YM continues to underperform and although it bounced, it barely got back above the break-out level. The directionality tool is still heading down which is also a sign that the back-test is not decided just yet.

Weekly Cycles

Weekly Cycles

The daily cycles had an important development last week as ES finally triggered a 3rd END resistance. That signals that the up impulse is now completed. That is a very important line in the sand going forward and the normal expectation is for downside to follow. However if the market manages to break above that level, against the odds, and turn this into a nested impulse up, then that would be very bullish and would signal a lot more upside to come.

Daily Cycles

Daily Cycles

While the week closed marginally higher, we still remain at a crossroads via our NYSE Elliot Wave count.  The rising support is key to maintaining the structures integrity.  Any sustained breach should be taken as a warning that the 'or 2' scenario could be in play in the alternated count and a dramatic decline could be just around the corner.  Seasonal expectations on the week are for more weakness which would imply overall chop assuming the rising support remains intact.  From everyone here at MCM we hope you all have a safe and profitable trading week.

NYSE