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

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

mcm Market Update For Week 38

The FED week was a good omen for the bulls and the market finally managed a small break-out above the choppy range in which it was stuck for a few weeks already. We had several short term cycles break into up impulses on mcm, which provided early clues about this ramp.

Coming back to the big picture, the weekly cycles show a dangerous development for bears. The back-test of the 2105 break-out level appears to have held. The market bounced from there and if it will continue to go higher that will be a situation in which shorts would have to be patient for quite a while. YM continues to underperform, however it bounced when it met the mcm-MA and now managed to get above the broken resistance also. The bears do have one more chance and that would be to reverse this bounce rather directly. The fact that the directionality tool is still heading down is also a sign that the back-test is not decided just yet.

Weekly Cycles

Weekly Cycles

The daily cycles are the reason why we are not fully in the bullish side just yet. They unwinded the big up impulses started back in March. YM completed that unwind (with a 3rd END resistance), while ES only had a 2nd END and could still (theoretically) get a 3rd END. In the mean time, they broke below support and actually started down impulses, although now the price came back above that support. So bears have 2 options here. One would be a direct reversal, which would mean the back-test of the previously broken support held and the down impulses are confirmed. That would be very bearish. The 2nd option is for the market to go higher and reverse after ES triggers the 3rd END resistance. As we can see on YM, that 3rd END doesn’t necessarily require a lot of upside to trigger. Once that happens, reaction to that resistance will be critical. If the bullish scenario on the weekly is to be confirmed the market could break into a nested impulse on the daily. But the normal expectation is for downside from there. As always, the shorter term cycles will provide early clues into which scenario will play out.

Daily Cycles

Daily Cycles

The Elliott Wave projection of the NYSE is also pointing to a crossroads with regards to market direction.  With minimum expectations of the structure being met, waves one and four overlapping, the market is free to do as it sees fit from here.  The duration of the fourth wave seems to be lacking taking into consideration that from a seasonal perspective, most bottoms aren't put in place till sometime on or after the second week of October.  While the projected paths are very insightful as far as targets and bias is concerned, the fact that markets don't go in a straight line as the projections do makes for a challenge.  Keeping that in mind, although we've bounced in what appears to be the final leg up to new all time highs, there is a very good potential this is just a counter trend move that has the potential to bottom at 'or 2' into the month of October.  Best to your trading this week.

NYSE Composite

NYSE Composite

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 13 – 17 Jun

Executive Summary:
Main Trend (weekly): neutral
Intermediate Trend (daily): up
Short-Term Trend (480&288min): neutral
Details:
On the weekly cycles, as warned about the possibility in the previous newsletter, the market tried to get above the exact level of resistance, at least on ES. It is interesting that YM is under-performing quite noticeably and never made it to the resistance level, while ES managed to overcome it slightly. The long term view is unchanged and the expectation is for the resistance level to hold and the market to register a more significant correction from this general area. Where exactly the market will finish running the stops is difficult to pin-point exactly and the shorter term cycles should provide better early clues in this regard. The directionality tool is still close to maximum levels and would need to start moving down to confirm a turn.

Weekly Cycles

Weekly Cycles

The daily cycles show better the brief move above resistance and here the YM moved in sync with ES, although it’s under-performing vs the previous end of April high. The directionality tool started to move down on both ES and YM and its behavior going forward will be telling for if this is a more significant turn or not. The mcm-MA could provide some near term support, together with the new LRE (lower risk entry) for longs which triggered on YM on Friday. On a bigger picture level we expect the up impulse to either be finished or to require another BR and a 2nd END. For another BR support to trigger more downside will be needed though.

Daily Cycles

Daily Cycles

The 480 and 288min cycles provided early clues about the turn. 480 had previously unwinded an up impulse with a BR and an END resistance in the same area as the weekly and daily resistances. 288 also had resistance trigger there. The market attempted to break-out over those resistances, however failed to sustain momentum and 480min never confirmed the nested impulse. The directionality tool moving lower also warned that the break-out was likely a head-fake and that the up momentum was not sustained. After coming back below resistances, both cycles then triggered support levels which were broken and are now very close to confirm the down impulses. If they will confirm and hold a back-test, that would warn of a bigger correction.

480&288min Cycles

480&288min Cycles

Note: please be aware that the price on the charts has been corrected with the roll-over of the ES and YM contracts from June to September.

MCM Newsletter – Outlook for Week 30 May – 3 Jun

Executive Summary:
Main Trend (weekly): neutral
Intermediate Trend (daily): up
Short-Term Trend (480&288min): up/neutral
Details:
The initial decline from the triggered resistance level on the weekly cycles has stopped when it tested the mcm-MA and the market managed to bounce from there. Now, price is close enough to the resistance level to be considered a back-test (highlighted on chart). What happens here will be key for the main trend direction, with the normal expectation being for resistance to hold and market to have a more pronounced correction. As it can be seen from the previous resistance levels, it would not be totally unexpected for the market to either head directly lower or challenge the resistance a bit more before that. The directionality tool should be watched closely for signs of down movement as well. Interesting is that YM is underperforming ES, being about 200 points below the resistance level, while ES is only 7 points.

Weekly Cycles

Weekly Cycles

On the daily cycles, we can see that the mcm-MA on the weekly also had help from the daily when it held. Namely, the market back-tested the bullish retrace (BR) support which had triggered a while back. That back-test showed that not all is as bullish as everyone thinks since the support held with difficulty and was spiked below. However it did hold in the end and market bounced strongly from there. Now an END resistance to that BR could trigger basically any time at these levels. It can also be seen even better than on the weekly cycles how significant is the YM underperformance - while ES went clearly above the previous high, YM did not and is in that general area. The mcm-MA on YM also turned red and we started to get some LRE (lower risk entries) for shorts. As previously said, once that END triggers, that would signal a possible unwind of the up impulse and in the context of the weekly, a larger down move would be expected. There is also the option that a 2nd BR will trigger and require a 2nd END, which would need more back and forth movement before the bigger correction.

Daily Cycles

Daily Cycles

The 480 and 288min cycles show the effect of the big move we had in the past 4 days. 480min actually broke into an up impulse, while 288 had a larger regular wave which triggered resistance at 2092.75. Considering the up impulse on 480, if the market sustains the move past this level and starts an impulse also on the 288min cycle, then we would have to acknowledge that the bounce would have further to run. However, the resistance on 288 might still hold, despite of it having been spiked briefly, so keeping an eye on that level in the next few trading sessions is important.

288&480min Cycles

288&480min Cycles

MCM Newsletter – Outlook for Week 23 – 27 May

Executive Summary:
Main Trend (weekly): neutral
Intermediate Trend (daily): up
Short-Term Trend (480&288min): neutral
Details:
The weekly cycles continued to move slightly downward from the resistance level. As mentioned a while back, the mcm-MA provided some support and the market failed to break below it so far. Also a historically relevant level was tested last week and held (highlighted on the chart). The directionality tool is still at the highest level and it would be important to see when it starts moving lower. So far it looks still open whether the market will be able to back-test the resistance level again or if it will accelerate down.

Weekly Cycles

Weekly Cycles

On the daily cycles, the unwind of the up impulse is continuing. After failing to sustain the initial bounce off the bullish retrace (BR) support, the market back-tested that level again, came slightly below it and recovered it once more. Although the support level may still hold and this bounce could continue until an END resistance is triggered higher, the fact that the price came below the support level shows the market is no longer full-on bullish. That also means that the END could come after a weaker bounce than usual.

Daily Cycles

Daily Cycles

The 480 and 288min cycles continued to whipsaw their support and resistance levels, showing the emotional behavior of the market. The last level triggered was support on both, which appears to be holding after being spiked below in a few instances. As the predictive pivot is also higher, the normal expectation is for the bounce to continue until a resistance level is triggered. How the market behaves there will be important for the near term.

288&480min Cycles

288&480min Cycles

In conclusion, it seems the market is staying true to the saying a top is a process not an event. The 288&480min cycles did not break into real impulses just yet (although 480 had an impulse down unwind, that had more a sideways form rather then being truly impulsive). The BR support on the daily still attempts to hold and is the key line in the sand for downside movement, while the resistance on weekly is key for upside movement.