Posts

MCM Newsletter – Outlook for Week 12-16 of June

The market moved mostly sideways (with a light down bias) last week, before putting in some fireworks on Friday. The action on the last trading day of the week deserves more careful analysis, as the market made a new ATH at the opening of the session, but which was then strongly sold off with a 30+ points decline, before bouncing back in the last hour before the close. This type of action, with a strong and fast reversal after a new high would normally point to at least some kind of short-term top, corresponding to a 5th wave in EWT. Currently the bear (EWT) options are not obvious, and this apparent top might be very short lived and be overtaken soon, but it just might be something more. 2398 is the first level to watch for an overlap on the way down.

Weekly cycles didn’t change much, except the directionality line on YM also started to move up like we were expecting last week.

Weekly Cycles

The daily cycles are still above the resistance levels, but didn’t significantly breakout just yet. As the market moved quite near them on the lows from Friday, this can qualify as a back-test, so what the market does next week will be important for the intermediate term also. If it holds the lows and bounces, then the breakout over resistances might become another up impulse. If the market breaks below the resistance levels, then it means the initial breakout was just an overshoot and more bearish resolutions are possible.

Daily Cycles

The 288 and 480min cycles    
You need to be authorized or upgrade to see this content. Please go to http://mcm-ct.com/membership-signup-dev-2/ to sign up.

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    
You need to be authorized or upgrade to see this content. Please go to http://mcm-ct.com/membership-signup-dev-2/ to sign up.

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 Weekly Market Update For Week 37

The past week started just as brutal as the previous one ended. After making a new low on Monday in the overnight session, the market rallied 50+ points from that low. Luckily the mcm tools nailed that low and warned of the bounce beforehand. If you didn't have a chance to read the article detailing how that happened, you can find it here: http://mcm-ct.com/blog/anatomy-of-a-tradable-bottom/  While a valiant attempt was made to recoup some of the previous weeks losses early on this week, ultimately they failed with the NYSE closing roughly 0.75% lower than the previous weeks close.

Monday's action was the highlight of the week, the rest of the trading days being more choppy, with a lot of back and forth typical for sideways action.

The weekly cycles show that the back-test of the 2105 break-out level is ongoing. Market bounced from there, but it's too early to call for a successful back-test and sound the all clear for the bulls. The action in YM is also a warning sign, the price sliced directly through the break-out level and is currently in a direct overlap. The action in the next 1-2 weeks appears decisive for a resolution of the back-test and 2105 is still a very important level and worth keeping in mind.

Weekly Cycles

Weekly Cycles

The daily cycles provided an excellent signal last week also. Namely, Monday's rally stopped almost exactly at the previously broken support sitting at 2154.5. The market retreated from there and then chopped around inconclusively. So it appears that we have what looks like 2 successful back-tests. One on the upside (on the weekly) and one on the downside (on the daily). The resolution of one or the other will paint the medium term picture. In the meantime the 2 levels are very important and critical to keep an eye on (2105 and 2154.5).

Daily Cycles

Daily Cycles

The preferred path outlined in last weeks update on the NYSE tracked exceptionally well despite the massive volatility we found early on in the week.  Currently we are at a crossroads as to whether we'll continue down on the path to 'or 2' or stage a rally from this general vicinity to cyan 3/C/5.  In Elliott Wave there are some requirements that must be observed for the validity of a Ending Diagonal (Technical Analysis rising/declining wedge) structure.  The first which was satisfied with this weeks price action with the overlap of the first and fourth waves.  The second is that the fourth wave cannot be longer than the second wave.  This second criteria is of great importance in this instance as it will serve as an early warning that price will have a greater probability to head to much lower levels if that criteria is broken.  This week is likely to be an important one with regards to which outcome becomes the most probable.  Trade safe.

NYA

NYA

 

 

 

 

mcm Weekly Wrap_Week 36

After being range bound for quite a while the market finally broke out, or better said broke down. The brutality of the decline was surprising, the market losing approximately 80 points in just 2 days. As the readers of the mcm Weekly Newsletter know, we have been expecting a back-test of the 2105 level for a few weeks now and the market delivered just that, although a bit abruptly. Coinciding with the Weekly Newsletter, the Technical Analysis Lab weekly update has been noting since the start of August to expect weakness coming into the beginning of prime trading season with decade, presidential, and historical seasonality all aligning for the early fall season.

The weekly cycles show why the 2105 level is so important. It was a resistance level above which the market broke out and it became an impulse up on ES (after the mcm-MA also broke above that level). And usually, after an impulse is confirmed the market comes back to back-test the break-out level. An interesting fact is that YM has under-performed significantly on the rally and, although it also broke out above the resistance level, it was nowhere close to confirm the up impulse. Also, YM sliced right back below the resistance level on Friday's drop. The current back-test on ES is very important. Holding it and bouncing would be very bullish, while breaking back below would reverse the up impulse and cancel the bullish momentum.

Weekly Cycles

Weekly Cycles

The daily cycles show why we were doubting (and still are)  the real break-out into an up impulse on the weekly. They have been in a big up impulse ever since it broke out above resistance around 1950 ES. The impulse up has started to unwind with a bullish retrace (BR) and an END, then another and a 2nd END, so it was in a terminal phase, not supportive of a new big up move.

Coming back to the recent past, the daily cycles show nicely the brutality of the decline registered last week. 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 in the mcm Newsletter 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

There are a couple of options from an Elliott Wave standpoint that we are currently tracking. Although our primary focus is for the S&P 500 and its futures, we do track many other markets as well, one of the those being the NYSE Composite. Weighting a number of various items, expectations are for some near term weakness and then another run at new all time highs, but the depth of the correction currently underway can take a couple of paths as noted above.

NYSE Composite

NYSE Composite

 

 

 

Technical Laboratory Update For The Week Of August 21, 2016

Happy weekend everyone!  Finally our week of MSP timing is upon us, August 22nd to 23rd to be exact.  Looking at the longer term preferred path that was outlined in the first Technical Laboratory update (here) we found our near term target of 2191 and promptly reversed following the preferred path towards 'Diag 4'.  Also from that post we discussed how presidental election cycle seasonality coincides remarkably well with what we are seeing with the long term MSP.  This adds a degree of confidence to weakness beginning around this week into the first of September and running through to the first of November.  The secondary options are still structurally 100% viable but we will not concern ourselves with them, so long, or until price gives us reason to question the preferred magenta path.

SPX Intermediate Term

SPX Intermediate Term

The next chart of focus is that of the VIX.  For anyone not familiar, the VIX was designed to be a gauge of volatility expectations looking forward in time by 30 days.  On a longer time frame it becomes very valuable because it shows that historical periods where volatility is low, between 10.00 and 12.00 leads to a decent size uptick in volatility within the next six months.  With the exception of 1993 and 1995, past instances of this chart finding the ten to twelve zone have lead to runs from a minimum of 17 up to as much as 150.  We entered into this zone at the beginning of July as you can see from the chart below.  This increases expectations of market volatility dramatically and coupling that with what we already know with regards to MSP and presidential cycle analysis we have a recipe for a very volatile fall.

Volatility Index

Volatility Index

In conclusion, although we are a stones throw from the all time highs, evidence is piling up that points to it being increasingly dangerous as the days pass to be long the market.  Good luck this week and profitable trading.

Technical Laboratory Update For The Week Of August 7th, 2016

Hello everyone, this is going to be the first of many weekly updates that I will be doing in tandem with Alex's cycle analysis to help shed some light on general market conditions and potential direction.  The market has remained range bound over the past couple of weeks which some have said is topping and others have said is basing.  From a structural market standpoint both groups have a valid argument.  Our technical breakout over the range on Friday to new ATH's in both the S&P and the ES futures market has many under the impression that our new rally leg up is upon us.  With all rallies, and for that matter declines, it is important that trade is sustained at the new found levels.  In this update I'll identify three potential longer term paths and from there we can assess weekly progression and which path currently presents the higher probability.

 

SPX

SPX

The preferred path at present is the magenta one.  All three of these paths revolve around the 2191 area and begin to diverge from there.  The Elliot Wave label definitions are not necessary to understand, they are simply to identify the type of predetermined structure that could unfold from a given area.  The 100 year presidential market cycle chart that was posted on the board a week ago gives more credibility to the magenta ending diagonal path as that has an upward bias running until the latter portion of August and potentially into early September before we run into more sustained weakness.  (see below)

Presidental Election Year Seasonality

Presidental Seasonality

The longer term MSP also coincides with the idea that August is likely to sustain trade in this general vicinity till the latter portion of the month.  Also of note with this chart is the weakness period through July was more of a sideways move than a decline.  This  could be hinting at underlying strength in the overall trend that could manifest itself into a more pronounced August rally than is presently expected and more in line with the purple Impulsive Wave 3 path in the above technical chart.

LT MSP

LT MSP

Based on both the LT MSP and the seasonality chart, the third option in dark grey of an Expanded Flat Wave 2 is currently weighted as the lowest probability but is something to keep in mind as we progress through the month of August.  Ultimately the 2191 demarcation point is key to all three of the scenarios going forward.  From all of us here at MCM we wish you a safe and happy weekend and look forward to seeing you all in the Expert Lounge next week.

S&P500 Expert Lounge Update – June 9, 2016

Good morning everyone,

These are key timing for today:  9:45AMEST, 1:00PMEST

These are key MA levels:  5EMA 2110, 10SMA 2105, 20SMA 2083, 50SMA 2077

These are key Fib Levels: 2119, 2116, 2104, 2096

These are key primary and intermediate levels:   2099(minor), 2115(major), 2126(primary major)

Here is today's market look at the S&P 500 for Thursday, June 9, 2016

Be cautious with the cycles analysis due to the futures contract roll creating a large gap down in price which will take a couple days to balance out.  The big economic report out today is Jobless Claims at 8:30AMEST followed by Bloomberg's Consumer Comfort Index at 9:45AMEST which coincides with timing and finally Wholesale trade at 10:30AMEST.  Yesterday's high of day reached the last remaining downward sloping trendline/resistance from the all time high, and coupling that with HAL initiating short positions some weakness for today's session is to be expected.  Trade safe and have a good day.

MSP

MSP

Primary and Intermediate Levels

Primary and Intermediate Levels

Yellen - Why Is It Not Working?

FED Speak, FED Hike, FED Squawk – Some Disccusion

Yesterday we posted these comments regarding the FED:

Another anecdotal issue is that the FED is due to report their unbelievably tortured analysis and process geared to raise interest rates by only 25 basis points. However, at this point the FED credibility is pretty tattered and IF they raise interest rates they will be viewed as non-data dependent to the contrary of their propaganda. If they do not raise interest rates they will be show that the verity of their analysis and policies is likely sorely lacking. In either case, the best the FED can do is damage their credibility or damage it more. Not particularly wonderful outcomes and for the markets this could imply that no matter what the FED does will be received negatively.

Yellen - Why Is It Not Working?

Yellen?

It is worth noting that if things get too challenging in the markets, the Fed may decide not only "no hike" but QE and effectively "rate cut". This woul be data driven of course and all in the span of less than 2 weeks of data. The question is would any new QE solve the problem? While there is no reason to doubt that a rally on some QE announcement would occur, the problem is that we are facing liquidations of malinvestments. As in 2010, after the initial rally in equities, QE funds and liquidity sought an avenue for allocation - the chosen allocation was not previous dubious products - and did not immediately go into equities or bonds - it went into commodities.  This caused dislocation in the commodities markets with many commodities rising hundreds of percent in a very short time - which in turn caused the "Arab Spring" (which was no "spring" but rather a revolt by starving citizens) as many poor and middle-class Middle Eastern people were unable to afford necessities of rice and other foods. They were forced to choose between buying food or paying rent. Similarly, were sitting in the situation in which junk bonds need to be liquidated and QE liquidity would not be allocated easily to junk at this time. Therefore, the only option for the Fed, which this analyst feels would further damage their credibility, would be for the Fed to directly purchase declining assets and junk bonds. Certainly, the FED can purchase junk bonds and represent them on a portfolio at par as they have done with many of the bankrupt entity debt that that they purchased in 2008 and 2009 (Maiden Lane III Portfolio) - but this does not inspire confidence.

So, in summary, it appears that if damage becomes pronounced to the equity and debt markets now or int he future theFed may need to attempt to directly arrest it. However, their tools are not precise and not effective. Moreover, they would be seeing as hypocritical because how could they not see this coming, and, in fact, want to do a rate hike just before major damage to bond and equity markets would occur. Either way, the situation as it seems to this analyst, is a no-win outcome for the Fed, no matter what they do. The best probable scenario that likely exists is that the Fed just buys every asset that is going down and attempts to arrest decline by increasing the balance sheet further and also deteriorating its quality.

Is it really possible, that if these options are even on the table? And would they work or make a difference for more than a short time?

Weekly Cycles Are Just Turning – Needing Time to Resolve

Last week was a tough week for risk assets as expected. The next few days are key as ideally timing for a bounce exists this coming week it is possible, however, this cycle inflection point can right translate and a turn from down to up may require more time. The reason for this is that we are now in the acceleration phase of double downward running correction breakouts. On a conservative basis, timing should be for Tuesday or Wednesday for a low. However a caveat implies that those "short" should consider trailing stops down rather than exiting shorts on any further weakness. Below is a chart of the weekly cycles - the turn has only just begun as per the rejection of the magenta resistance cycle - additionally, the cycle direction study is only just now beginning its reversal downwards and will require, at a minimum, a few weeks to reach the zero bound (See [1] and [2] on the chart). There will likely be bounces within any such move however, it appears that the market can easily reach the running correction targets of 1,940 or 1,800.

Another anecdotal issue is that the FED is due to report their unbelievably tortured analysis and process geared to raise interest rates by only 25 basis points. However, at this point the FED credibility is pretty tattered and IF they raise interest rates they will be viewed as non-data dependent to the contrary of their propaganda. If they do not raise interest rates they will be show that the verity of their analysis and policies is likely sorely lacking. In either case, the best the FED can do is damage their credibility or damage it more. Not particularly wonderful outcomes and for the markets this could imply that no matter what the FED does will be received negatively.

Weekly Cycles

Weekly Cycles

While we do not have sufficient data to build complete MSP on the HIGH YIELD asset class, there are some worthwhile observations which could be troublesome. While we are not comfortable with MSP setup for HighYield enough to publish it - here are some general observations: market structure projection on a broad basis pointed to normal probabilities starting last week into the Christmas time as among the most positive of the year. This is interesting, because when something deviates significantly from MSP then it's often likely something serious is going on. So far. is that is appears people were attempting to be set up for this potential strong upward move for HighYield and are presently getting stopped out. When people get trapped in trades and the market does not cooperate, things can often go as strongly opposite as they would be expected via MSP to go based on probability because people are caught by surprise. Technically, the MSP setup bullish for HighYield into Christmas, however, IF we have inverted and turned buyers into trapped sellers hungry to get out - then it is possible weakness can continue in HighYield until Christmas. We currently appear to be contradicting the probability projections of MSP for strength for HighYield - this could be A BIG PROBLEM if participants become trapped.