MCM Newsletter – Outlook for the 1st Week of May

The market continued to move higher last week and did so more convincingly than the previous week. It opened on Monday with a gap up of more than 20 points and Tuesday saw another opening gap up, this time smaller (around 7 points). The high of the week came very close to the ATH, before the market retreated a bit in the last 2 trading sessions. Our preferred EWT scenario (bullish) played out, despite the initial chop which had us question the validity of this (presumed) 3rd wave. Now it looks like this wave up might need another high before finishing and the coming correction from there will be telling to see if this is indeed a bullish impulse up or not. As it looks right now and in accordance with our thoughts from the previous newsletter this doesn’t look like a “real” 3rd wave up, which has us thinking it might be part of a more complex correction which started at the ATH (potentially a B wave of a flat). But we will burn that bridge once we come to it.
Weekly cycles did not trigger any new signals. Directionality is still moving lower which is a sign that it is not time to sound the all clear for the bulls just yet.

Weekly Cycles

The daily cycles continue to unwind the up impulses. ES triggered a 2nd END resistance, while YM also triggered an END resistance level. This is a sign that the upward energy of these impulses is dissipating. Considering that this is already a nested up impulse (an impulse following another impulse), it is unlikely that the market will have enough strength to break above these resistances and create another nested impulse. That being said, a marginal new high is not excluded, but we do not expect the resistance levels to be broken above significantly.

Daily Cycles

The 288 and 480min cycles    
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MCM Newsletter for Week 17-21 Apr

After moving sideways 2 weeks ago, the holiday shortened week brought a clearer direction, which was down. The market was weak in all 4 trading days and finished at the lows on Thursday. The short term EWT scenario we kept referencing is very close to a resolution now. The low close to 2320 is all important and the separation line between the bullish and the (very) bearish scenario. It did not get taken out yet, so the bullish scenario is still preferred. However the market came quite close and is still too close for comfort for the bulls. Which is why Monday is likely to bring a resolution, one way or the other. Both scenarios point to a strong next move, so the action from here will likely affect the intermediate term trend.
No big change on the weekly cycles. ES is now testing the mcm-MA again and will be interesting to see if this will provide support again. Directionality continues to move lower.

Weekly Cycles

The daily cycles saw an interesting development last week. ES triggered already an END resistance, which had shifted the expectation down once it confirmed. YM did not trigger one yet, so the support on daily YM is still valid. Directionality is still stuck at the minimum level, and is getting a bit long in the tooth for a bounce.

Daily Cycles

The 288 and 480min cycles
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MCM Newsletter – Outlook for the Week 20-24 February

The market continued its bullish character from the end of the previous week and broke out quite convincingly to the upside despite a zone of strong resistance.

As a result, the weekly cycles moved further above their resistance levels in what can be considered a break-out. ES just confirmed the up impulse (by having the mcm-MA moving above the break-out level), while YM despite needing more work before confirming an impulse, has moved significantly above the resistance level as well. These new up impulses on the weekly cycles are significant and change the intermediate term picture to bullish.

Weekly Cycles

Same thing is confirmed by the daily cycles. Both ES and YM are in confirmed (nested) up impulses.

Daily Cycles

On the 288 and 480min cycles    
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MCM Newsletter – Outlook for Week 12 – 18 Sep

Executive Summary:
Main Trend (weekly): up
Intermediate Trend (daily): up
Short-Term Trend (480&288min): down/neutral
Details:
As mentioned already several times in the previous newsletters, the normal expectation was for the market to back-test the break-out above resistance. This is exactly what happened last week as market dropped with conviction and ES is now back-testing the impulse up break-out. YM is diverging again having already failed the back-test by dropping below the resistance level. Of course, YM never confirmed the up impulse, so the ES back-test is more important. What happens next is key and the normal expectation would be for the previous resistance to provide support even if, in the end, it will fail.

Weekly Cycles

Weekly Cycles

On the daily cycles, we can see nicely the brutality of the decline. The market basically lost aprox. 80 points in just 2 days and sliced directly through the support levels. In fact ES is now close to confirm a down impulse. As we were mentioning last week, breaking directly the support levels before resistances trigger is very bearish, although it depends a lot on what the market does in the next 2-3 days. If the break-down is confirmed and the market cannot manage to bounce back to or even above the support levels, then the bearishness will be confirmed. We do have to mention that both ES and YM triggered LREs (lower risk entries) for longs on Friday, so a near term bounce (maybe after a minor new low) would be normal expectation based on that.

Daily Cycles

Daily Cycles

Both 480 and 288min cycles triggered new resistances close to the highs after which the market dropped strongly. It is interesting that support levels did not trigger, so once they will, they will be very important with a bounce from there being the normal expectation.

288&480min Cycles

288&480min Cycles

In conclusion, after being range bound for quite a while the market finally broke out, or better said down. We have confirmed down impulses on all short time frames - 5, 15, 60, 135 (not shown) and we broke below support on the daily cycles as well. The speed of the decline was very high so the market is short-term oversold, however it is important to see if but also how the bounce will shape up. All the impulses down need to unwind, so some bounces followed by corrections to put in BRs and ENDs is the normal expectation. Bigger picture, the break-down below support on the daily is very important and if the market does not bounce towards the break-down levels in the next 2-3 sessions, that will be a serious warning for longs.

MCM Newsletter – Outlook for Week 5 – 9 Sep

Executive Summary:
Main Trend (weekly): up
Intermediate Trend (daily): up
Short-Term Trend (480&288min): neutral
Details:
No big change on the weekly cycles. ES is in a confirmed up impulse, while YM still needs the mcm-MA to also cross the broken resistance level before confirming the up impulse. It will be interesting to see if that will happen. As previously stated, the normal expectation is for the market to back-test the break-out level and in our case, that back-test becomes very important to see if the market can sustain the up impulse or not.

Weekly Cycles

Weekly Cycles

On the daily cycles, there was an important development last week. Both indexes triggered support levels, so the normal expectation near term is for the market to head higher until resistances are triggered. YM already put in a 3rd END resistance, meaning the up impulse finished the unwind and the index is now in a normal oscillation. However ES only had a 2nd END resistance and so the next resistance becomes very important since it will be a 3rd END resistance; and will mark the end of the impulse unwind also on ES. If the market breaks directly the support levels before resistances are triggered higher, that would be more directly bearish.

Daily Cycles

Daily Cycles

Both 480 and 288min cycles unwinded 2 consecutive up impulses with 3rd ENDs and are now oscillating, having had already support levels trigger. The market bounced enough from there to make it possible for the resistances to trigger any time. Reaction to those will be important, especially since we started getting quite a few LREs (lower risk entries) for shorts lately on both cycles.

480&288min Cycles

480&288min Cycles

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

MCM Newsletter – Outlook for Week 15 – 19 Aug

Executive Summary:
Main Trend (weekly): neutral
Intermediate Trend (daily): up
Short-Term Trend (480&288min): neutral
Details:
No real change on the weekly cycles, except the fact that the continued grind higher made the predictive pivot move higher. The up impulse on ES is still not confirmed, but if market holds up it could in the next 1-2 weeks. YM is still dragging on this and needs more time to (potentially) confirm. The action on the directionality tool is not very bullish with the lines becoming thick, but it doesn’t mean the market will turn immediately either. We have to look to the shorter time frame cycles for near-term clues.

Weekly Cycles

Weekly Cycles

On the daily cycles, both ES and YM managed to break above the resistance levels in the form of a 2nd END. It thus becomes very important to see if the market manages to stage a real break-out from here. Directionality bounced from the lowest level, however it is turning back down on ES, so it’s important to see what it will do next.

Daily Cycles

Daily Cycles

480 and 288min cycles show the plateau the market reached, after which it actually didn’t move much. 288 started a new impulse up and already began to unwind it, having an END resistance at last weeks’ highs, close to 2185. 480min actually managed to break over its 3rd END resistance and confirm a nested up impulse. Those 2 levels become very important for the near term since coming back below the break-out level on 480 would cancel that nested impulse and the bullish momentum, while breaking above the END resistance on 288, would mean more up movement is likely.

288&480min Cycles

288&480min Cycles

MCM Newsletter – Outlook for Week 8 – 12 Aug

Executive Summary:
- Main Trend (weekly): neutral
Intermediate Trend (daily): up
Short-Term Trend (480&288min): neutral
Details:
The first 2 days of August were quite weak, the market going from a new ATH in ES around 2177, to head-faking a break-down of the range in which it had been stuck since mid July. The low was close to 2140 and from there the market proceeded to make a new ATH. Now ES looks close to confirming its up impulse on the weekly cycle, while YM is still far from that, having underperformed quite a bit. Directionality is still going up and will be important to see how it behaves once it meets the maximum value.

Weekly Cycles

Weekly Cycles

The daily cycles show the market slowing down once it reached the resistance in the form of a 2nd END. It even drifted a bit down from there, but this recent ramp is testing the resistance level once again on YM, while on ES it already spiked a bit above. Directionality almost made it to the lowest point so the next 1-2 days look important to see what it will do from there. The normal expectation is still for the resistances to hold and market to have a bigger correction before another bigger bounce.

Daily Cycles

Daily Cycles

The 480 and 288min cycles both completely unwinded the up impulses they had, with 288 having been oscillating for a while, while 480 having just recently triggered a 3rd END resistance. Both the last resistances on 288 and the 3rd END on 480 have been broken above and are close to confirm new up impulses. Given the 3rd END on 480, the odds are low that it will be broken through significantly, so a pull-back below it would be normal expectation. Considering that 60 and 135min both broke into big up impulses (not shown), if they start to unwind sideways, that would be an indication that the break-out above resistances on 288 and 480 will likely be short lived. If 288 and 480 manage to break out significantly though, that would mean another leg up is underway.

288&480min Cycles

288&480min Cycles

MCM Newsletter – Outlook for Week 1 – 5 Aug

Executive Summary:
Main Trend (weekly): neutral
Intermediate Trend (daily): up
Short-Term Trend (480&288min): up/neutral
Details:
The market basically did nothing but move sideways in a tight range, putting in a frustrating week. One interesting aspect to note is the fact that YM started to under-perform ES quite significantly. This can be seen also when looking at the potential break-out into an up impulse. The mcm-MA is close to confirming the up impulse on ES, but needs a lot more work on YM. Directionality continued to bounce, but didn’t make it to the max value yet, so going forward it will be important to see if it will. Another interesting aspect is the fact that the predictive pivot sits now very close to the resistance levels (highlighted on chart), which adds weight to the expectation that the market will come back to test that level. Reaction there will be critical to watch for confirmation or failure of the (potential) up impulse.

Weekly Cycles

Weekly Cycles

The daily cycles show even better the under-performance on YM. While ES moved flatish to up, whipsawing the 2nd END resistance, YM drifted down from there. The directionality tool also started to move down and watching to see if it makes it to the minimum level will provide clues as to whether we will get the normal expectation of down movement from resistances or the market will attempt to spike (or even break) through.

Daily Cycles

Daily Cycles

The 480 and 288min cycles show nicely the unusual action from the last 2 weeks. ES only moved between 2151 and 2171 and has chopped the nerves of both bulls and bears. The 288min finished it’s up impulse with a 3rd END and is now oscillating, having a recent resistance at 2168.25. 480min is in a nested impulse up, which already had a 1st END, a new support and now we are on the look-out for a 2nd END resistance, which is likely to point the direction back down. Interesting is that the directionality tool moved to the lowest level on 480min and stayed there despite the choppy bounces. On 288 it bounced only recently, so the next 1-2 days will be important to see if it gets to the max value (pointing up) or it will be a failed bounce (pointing down).

288&480min Cycles

288&480min Cycles

In conclusion, the cycles show that downside risk is more significant than upside risk. The market did break-out over the resistances on the weekly and if the up impulses are confirmed, that would need to be respected. However the daily cycles are in the unwind phase of the huge up impulse, having put in a 2nd END resistance. It is unlikely that after such a big run, the market will have enough energy left to push through the resistances for more than a brief spike, before a more significant pull-back. The 288 and 480min are also unwinding up impulses (288 is oscillating already), which points to the same conclusion: the market is dissipating the energy from this huge rally and looks more close to a top than an intermediary bottom. That being said, if the shorter time frame cycles 288/480min but also 60/135min (not shown) will break into fresh up impulses, that would be an early warning that the market is indeed trying to push upwards despite the odds.

 

MCM Newsletter – Outlook for Week 25 – 29 July

Executive Summary:
Main Trend (weekly): neutral
Intermediate Trend (daily): up
Short-Term Trend (480&288min): up
Details:
The market continued the relentless up move, albeit at a slower pace. As mentioned last week a potential break-out and up impulse on the weekly cycles is now on the table, as price moved significantly above resistances. The direction in the next 1-2 weeks will be critical for confirmation (or not) of the up impulse. If the markets travel back down, the back-test of the resistance level became also very important to watch, as it is now support. The bounce started by the directionality tool continued and going forward it will be important to see if it gets to the maximum value or it will be a failed bounce.

Weekly Cycles

Weekly Cycles

Last week a significant development was registered on the daily cycles. A 2nd END resistance was triggered pointing to the continuing unwind of the up impulse. This 2nd phase of the unwind was unusually strong and as a result this sub-wave is a lot bigger than the 1st unwind (1st BR and END). The normal expectation now is for the market to correct until a new support level is triggered which will likely lead to another bounce to a 3rd END and complete unwind of the up impulse.

Daily Cycles

Daily Cycles

The 480 and 288min cycles are both in up impulses. 288 is already in the unwind phase, having had already an END and a following support, so a 2nd END could trigger soon. 480 is in a nested impulse which, even if it confirmed, never really broke out from the vicinity of the resistance, so it could still be reversed directly. It is interesting that the directionality tool on both fell and at the moment is bound at the minimum level which is usually a sign for weakness. Near term it will be important to see if it stays there or it bounces.

288&480min Cycles

288&480min Cycles