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MCM Newsletter – Outlook for Week 17-21 of June

The market it making history again making fresh ATH and closing very near them on Friday. It seems that the 3 waves decline we were mentioning last week (with the low at 2405) was all that it was, since we held that low and made new highs. Of course this can still be a B wave of a flat and if the market were to stop close to where we are and head down strongly, it would add weight to that scenario. But this option has to be viewed as the underdog now, so bulls are yet again favorites.

Nothing new to report on the weekly cycles. Directionality is worth keeping an eye on for early clues. We mentioned that it’s behavior was not bullish, but given this rally, that might change.

Weekly Cycles

The daily cycles provided an early warning to this ramp. Both ES and YM had supports triggered. ES canceled the nested up impulse, by having support trigger just below the previously broken resistance. While YM confirmed the up impulse and had a bullish retrace (BR) support. Both those supports held and were pointing up, at least until corresponding resistance level trigger.

Daily Cycles

The 288 and 480min cycles    
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MCM Newsletter – Outlook for the Week 13 – 17 Mar

The action seemed to change ever since the market hit the round numbers 2 weeks ago. The market made lower lows in 4 out of 5 trading days last week. Friday saw a bounce coming, but that bounce proved weak, ending with a cross type of daily candle (close equals the open, despite the intra-day swings. Usually points to a change of trend, or indecision).

The weekly cycles saw finally a clearer retrace and “dent” in the up move. The up impulses are still fully ongoing, so the picture is still bullish.

Weekly Cycles

The daily cycles show more clear where the decline stopped. The mcm-MA managed to provide support yet again - it did so several times in the past, so at least for now, the picture is still bullish. No new signal, except the fact that the directionality tool moved down, being the first bearish sign in a while.

Daily Cycles

The 288 and 480min cycles    
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Technical Laboratory Update For The Week Of August 14, 2016

We moved marginally higher this week out of our 2155 to 2175 range to a new 2175 to 2185 trading range where we closed essentially in the middle of on Friday.  Last week we covered potential paths for the coming couple of months which we'll revisit and weight at the end of the month once we have entered our turn window via presidential year seasonality along with a coinciding Weekly MSP turn.  Our focus for this edition is a longer view of cycles and their implications.  In the United States we average a recession every 5.5 years.  June marked the seventh year we have been recession free and are rapidly approaching the record set from 1981 to 1991 of ten recessionless years.  There are a few interesting items at play in conjunction with our business cycle becoming rather extended.

U.S. Recessions

U.S. Recessions

First is our exceptionally weak recent GDP numbers and the precedence it sets with regard to historical incidence of the same kind.  Below is the FRED chart with the description of the phenomenon.

FRED Chart

FRED Chart

The next piece is another cycle chart, but not of presidential cycles.  This one covers the 100 years worth of decades and their price behavior as they progress through each year.  You'll notice that year sevens have a history of containing some very nasty declines, think 2007 and 1987.

Decade Cycle Chart

100 Year Decade Cycles

While it is premature and perhaps a bit ambitious to already be looking ahead to 2017 it would also be complacent not to think about what may lie ahead.  This week we saw a chink in the strong growth main stream media narrative with PPI coming in with a negative number which indicates that deflation is rearing its head.  With rates currently only .25% above zero the Federal Reserve is in a tight spot with regards to options to attempt to stoke inflationary pressures without some seriously unorthodox and untested measures.  As the evidence begins to pile up it is beginning to appear as though the incoming newly elected president is going to be tested right from the word 'go'.  Good luck this week and we'll see you on the board.

S&P500 Expert Lounge Update –July 19, 2016

Good morning everyone,

These are key timing for today: 11:30AMEST, 3:00AMEST

These are key MA levels:  5EMA 2160, 10DMA 2141, 20DMA 2108, 50DMA 2092

These are key Fib Levels:  2196, 2170, 2152, 2141

These are key primary and intermediate levels:  2130(minor), 2126(primary major), 2116(major)

Here is today's market look at the S&P 500 for Tuesday, 19 July,  2016

It is going to be another light day on the economic data front with only the Red Book at 8:55AMEST.  It appears based off  price behavior that there could be a string of very quiet trading days leading up to the FOMC announcement next week.  In the area of cycles, the daily has put in an unconfirmed 2nd End which will confirm at the end of the ES trading session so long as there isn't a substantial rise in price during the trading day.  This will make for a battleground area for buyers and sellers going forward.  Good luck today and mind the chop.

MSP

MSP

Primary and Intermediate Levels

Primary and Intermediate Levels

MCM Newsletter – Outlook for Week 18 – 22 July

Executive Summary:
Main Trend (weekly): neutral
Intermediate Trend (daily): up
Short-Term Trend (480&288min): up
Details:
The market continued to rally, making new all time highs and now both ES and YM moved above their weekly cycle resistance. The price traveled enough upwards to put the scenario of a potential break-out on the table. It doesn’t mean that this will happen, but it does mean that if the market travels back down, a back-test of the resistance level will be very important to watch, since it could act now support. The directionality tool never made it to the lowest point and started to bounce and its behavior is also important to watch going forward.

Weekly Cycles

Weekly Cycles

The daily cycles are still in the unwind phase of the up impulse. We were mentioning last week that the exact turning point and trigger of the 2nd END resistance has some room, however the market moved a lot higher which makes the form of this 2nd unwind less than ideal. Once the 2nd END triggers though, that would be an important line in the sand and potential turning point.

Daily Cycles

Daily Cycles

The 480 and 288min cycles show the relentless upward action in more detail. 288 is in an up impulse which still needs an unwind phase, while 480 unwinded its up impulse with an END resistance. That level was spiked above, however the market looks close to coming back down below it. Going forward the normal expectation is for some down movement, until support levels in the form of a bullish retrace (BR) will trigger (potentially on both). Those levels will be important to watch for reaction. The directionality tool is also important, with the one on 288 getting close to its lowest level. Behavior there will be telling for the near term direction.

288&480min Cycles

288&480min 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 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.

MCM Newsletter – Outlook for Week 9 – 13 May

Executive Summary:
Main Trend (weekly): neutral
Intermediate Trend (daily): up
Short-Term Trend (480&288min): down/neutral
Details:
The weekly cycles are still oscillating, however, as mentioned in the previous newsletter, the fact that the resistance level triggered is a significant event. That signals the crest (top) of the wave and although the market may choose to test that area again before heading down, the normal expectation is for it to hold any bounces and the market to move lower from that general area. The directionality tool did not yet turn down and once it does that will also be an important signal that the market is starting a more significant correction.

Weekly Cycles

Weekly Cycles

On the daily cycles, the up impulse started to unwind. As expected, the pull-back did trigger a bullish retrace (BR) on ES and on Friday it triggered one also on Dow. The normal expectation is for these levels to provide support and a bounce. If that comes to pass, the END resistance of that bounce would be a very important signal since that would mean that the impulse up either fully unwinded, or ended the first unwind phase (and a 2nd and potentially a 3rd END would be required). That level, viewed in the context of the resistance on the weekly cycles, becomes even more important and has the potential to mark an important top. There is one important thing to be mentioned about the potential END - it does not have to be higher than the previous high, just as the 2nd END (if we will get one) does not have to be higher than the 1st one. If the market fails to bounce and breaks these support levels for more than a brief spike, that would be more immediately bearish since it could start an impulse down. The directionality tool is still at the lowest point, if it will move upwards that would likely confirm that the bounce will continue and we will likely get the END higher. Additionally 3 consecutive LRE (lower risk entries) for longs triggered on the Dow and one on ES.

Daily Cycles

Daily Cycles

The 480 and 288min cycles continued their different developments. The 480min is still in an impulse down, after having held the back-test, while 288 is having a weak impulse up which is unwinding lower than the break-out level. Interesting is that 480min started to generate LREs for shorts - it had 2 consecutive ones (highlighted on the chart) which worked really well. Also 288 triggered 3 (highlighted on the chart) which behaved very well too. Another interesting fact is that the directionality tool on 480 moved lower from April 21st until April 25th and stayed at the lowest point until now. Near term it will be important to watch if the directionality tool on 480 will bounce and, if the market continues to bounce, what will happen at 2065 and another back-test of the impulse down on 480. It is important to mention that the next resistance level on 288 might be a 3rd END, which normally triggers a strong reaction.

288&480min Cycles

288&480min Cycles

In conclusion, the market may have registered an important high, at the level indicated by the resistance on the weekly cycles. Near term however, the normal expectation is for a bounce from the BR support on the daily cycles to unwind the impulse up. The behavior of the 288 and 480min cycles will be telling if we get the bounce indicated by the daily or not. 2065 ES and break-out into the down impulse on 480min is a key level. Holding that and/or getting a resistance level on 288 that holds, could see the support level on daily being under pressure again.

Using the mcm-CCI on RSI Cycles part 1

The mcm-CCI addition to the RSI Cycles turned an already useful tool into something so powerful that it quickly became my main reference for intra-day trading. I have seen it signal intra-day bottoms and tops, including the intermediate term bottom from the 20th of January. I am sure lots of people were reluctant to buy that bottom, myself included. But this tool proved its worth once more and proved my reluctance wrong.

Before going into examples to point out how the tool is working, please read the previous articles published on this subject for basic info on cycle behavior, RSI cycles and the mcm-CCI:

Now that the basics have been covered, we will focus in this article on one of my favorite ways to use mcm-CCI: anticipating the change of intra-day trends. There are 2 ways in which mcm-CCI on RSI cycles is doing that:
1. mcm-CCI is getting close to an extreme value: either close to +300 or close to -400.
2. a divergence between mcm-CCI and market price is occurring (eg: price is making lower lows, but mcm-CCI is making higher lows).
Here are several examples, with explanations attached.
1. mcm-CCI extreme value

RSI Cycles with mcm-CCI

mcm-CCI 1st example

At point 1, mcm-CCI was getting close to +300. At the same time, the RSI bars were showing an overbought condition (red bars). Shortly after the high, the directionality tool (white lines) tripped over and headed lower. At point 2 the previous impulse up of the RSI cycles was reversed, as the price broke below a support level (the bullish retrace, BR, cyan line). The mcm-CCI confirmed the move lower, by moving in the same direction. At point 3, the mcm-CCI broke below the 0 line, confirming the bearish character of the market. Afterwards the mcm-CCI didn't start to diverge from price and the impulse down unwinded in a near perfect faction, by moving side-ways and getting a 1st, 2nd and a 3rd END.

2. mcm-CCI divergence & test of 0

mcm-CCI 2nd example

mcm-CCI 2nd example

At point 1 and 2, we can see a slight divergence between market price and mcm-CCI. At point 1 both made highs, with mcm-CCI getting close to the extreme value of +300. At point 2, market price made a higher high, but the mcm-CCI did not. Although the lower high was not significantly lower, combined with the  overbought bar on RSI cycles and the resistance level and the directionality tool going to 0, there were enough clues that a change of direction is coming. Which happened and the RSI cycles started an impulse down by breaking the support (cyan line) level which followed. At point 3 we see another interesting signal from mcm-CCI. Namely - a test of 0. The RSI cycles bars were getting oversold this time and mcm-CCI tested 0 (coming from higher) and held. That is bullish and the market complied, bouncing higher. At point 4 and 5 we had yet another divergence between mcm-CCI and market price. Same scenario as before - market price makes a high, mcm-CCI makes a high (at point 4). Then at point 5 the market makes a higher high, but mcm-CCI makes a lower high, this time more significant than at points 1 and 2. RSI cycles break into a down impulse afterwards (break of the following support level - cyan line). At point 6 mcm-CCI fails the coming test of 0 and confirms more bearish implications, which quickly materialize with the market breaking down even further.

3. mcm-CCI divergence at the low on Jan 20th

mcm-CCI 3rd example

mcm-CCI 3rd example

As a last example of this 1st part, I will show what happened at the low this week. On 20th of January, right at the lows, when everyone was leaning bearish and didn't know how far the market would break, the mcm-CCI on RSI cycles signaled the turn. The same divergence showed in the above examples appeared and also in a significant manner - more than 100 points mcm-CCI divergence between the low at point 1 and the higher low at point 2, where the market made a lower low in terms of price. As soon as a support level (cyan line) appeared and held on RSI cycles, the change in trend started to take shape. At point 3 we had another great coming together of signals - overbought bars on RSI cycles, combined with a resistance level (magenta line) and mcm-CCI testing 0. That triggered a retrace, but which was held by the next support level triggered. At point 4, the RSI cycles broke into an up impulse and mcm-CCI also broke above the 0 line, confirming the more bullish tendency.

Happy Holidays & Market Projection Update

We wish you a Merry Christmas and happy holidays and a successful 2016 to come. 2015 has been an interesting year for MCM and we will do a review of our successes and failures things with improved, and weaknesses and strengths. Overall, as can be seen from the chart below market structure projection has been one of the strengths, and it has successfully projected the market out for many months now. These projections have not changed as they are rendered in the charts and remain relevant to market behavior. Weakness projected into [5] bounced as expected and began the latter part of a Santa Claus rally. The strength of the drop that occurred last week did not fit into the resolution of the weekly projections. However, if you do look at the daily projections which are the white lines at the bottom the chart you can see the morning to morning weakness that showed up during those days. Again, these renderings have not changed and remain relevant. This coming week as a potential to be a pronounced decline. For the January effect for this year, the average closing gain for the year is -9% or so. While we may not reach -9% next week has the potential to take us significantly towards this direction and caution would be advisable. This is certainly NOT an options being presently seen in popularity on the internet as most Elliott wave and technical analysts are distracted with triangles which in this analyst's option are way too obvious and accepted to follow expectations easily.

S&P500 Daily and Weekly Market Structure Projections

S&P500 Daily and Weekly Market Structure Projections

Again, we wish you a very merry and safe Christmas and look forward to seeing you in the new year. Please come back to see our year-end review mentioned earlier in this post which will be posted soon.