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Updated Projections and Detail Regarding MSP

In this article, we publish updates to the various MSP charts presented on these pages recently. As mentioned previously, there was a bug fix which corrected the significant misplacement of certain MSP points under certain conditions. The comparison and analysis demonstrating this problem is shown below at the bottom of this article. The result of this discrepancy is that the incorrect MSP did not track, but the correct MSP tract as well as one could possibly want. With that, the corrected MSP is showing an inflection point of this week for the S&P 500. Not only that it is showing inflection points potentially building up for the DAX and the bond market. The bond market rally seems to have been a very foreign concept. However, market structure projection got it right so far. Keep in mind, that the most sophisticated work we have done related to the equity indexes and market structure projection is being expanded to many other products - this is a process.

One of the interesting things is that copper and gold, which had a high pressure for a turn in November have not tracked and diverged significantly from their projected behavior. This indicates that something else may be going on, and caution is warranted. In either case, the high probability area for gold to launch a sustained rally appears likely in January.

S&P500 Market Structure Projection

S&P500 Market Structure Projection

US Bonds Market structure Projection

US Bonds Market structure Projection

DAX Market Structure Projection

DAX Market Structure Projection

Detailed comparison of Incorrect MSP versus corrected bug fix

Detailed comparison of incorrect MSP versus corrected bug fix

Gold Market Structure Projections Suggest Problems Ahead for Risk Assets

We posted a few weeks ago, market structure projection gold has reached its inflection point at [1] in the chart below. While a smart 3 to 4-week bounce which could be significant would be reasonable, important point to note, is that goals has reacted at its expected timing and if we get a strong rally. The goal chart below suggests that the reaction to the Fed policy adjustment or activity may not be nearly as rosy as the stock market would like it to be. This chart says danger ahead. Last goals. Investors think that they are out of the woodshed, it also appears that after this rally a new low in January for gold is a high probability. The most bullish scenario for gold would be if a low in January was a divergent low meaning that it has a higher low than the current low. This is not currently the preferred view, but it is a distinct possibility and if it were to occur with the market structure low implied for January it could suggest a very large gold rally.

Gold Market Structure Projectons

Gold Market Structure Projections

An Overview of the Markets and Projections

While many are likely to have been turning their bearishness into bullishness over the last week or so, having confused bearishness and the potential for new lows in September where bullishness was warranted into November with of upward probability. Currently, we are sitting in a key timing window for the S&P500 as we have discussed recently and have high probabilities of a turn either being in as of the beginning of this timing window last week or possibly into this week (ideally early).

While we did expect back and fill earlier in the month of October from the 2140 area, the primary scenario expected strength into November. However, running corrections reduced the pullbacks that should have appeared early in the month to trivial events. Even though a correction/consolidation was registered on the charts, this correction period was classified as a running correction. A running correction is a pattern in which the impetus for market participants to interact with the market is so strong in one particular direction that what normally would be a price retracement pattern or consolidation becomes a consolidation with direction. Meaning, that instead of a consolidation pulling back it actually grinds upwards during the correction process when occurring in an upward market and then breaks out. These patterns are prone to very strong reactions in that many people attempt to short what looks like a breakdown that actually never occurs and immediately runs against them - thus trapping as many participants as possible. These patterns are powerful in up markets and in down markets and are occurring increasingly as greater intervention in markets occurs.

Given this, market structure projection indicated a pronounced period of upward bias throughout October and left translated MSP precisely indicated the previous turns. The market has been leading (which we refer to as left translation) the normal market structure projections. We represent this in the charts with the cyan plot showing the left translated projection which has coincided very well with activity in the markets over the last 2 1/2 to 3 months.

Moreover, market internals and other symptoms of ill health abound, regardless of hyperbole from analysts or the Fed - it appears things are not healthy. Preceding the August crash, the equal weighted S&P 500 index underperformed dramatically. This index has underperformed even more dramatically during this bounce. It is this analyst's interpretation that this is a sign of significant stress. The stress will need to be resolved, and if history is a guide, the resolution is likely to be stronger and quite likely more persistent than our August episode.

Note, the market structure projection for commodities and bond markets. These projections suggest equally interesting timing and also contradict the prevailing perception in the markets as to what are reasonable expectations near-term and even medium-term. It appears that there is a quite marked probability of a buy-the-news reaction in bonds combined with the sell-the-news reaction in equities and latent dollars strength to keep pressure overall on the risks markets. It also appears that the dollar may have a significant inflection point in December to early January, which may, in fact, be a larger sell-the-news type event.

Accumulation index components

Accumulation index components

S&P 500 Index - equal weight vs. capitalization weight performance

S&P 500 Index - equal weight vs. capitalization weight performance

S&P 500 market structure projection

S&P 500 market structure projection

US treasury market structure projection

US treasury market structure projection

Gold market structure projection

Gold market structure projection

US dollar market structure projection

US dollar market structure projection

Oil market structure projection

Oil market structure projection

End of Octobe/Early November Inflection Points

Below is a set of MSP on the markets that we have been showing for months - the projections are irrefutable in that the market has tracked them to an uncanny degree. Next week is very busy in that almost all of the markets reviewed have inflection points of some kind that can trigger starting this week and into the turn of the month - potential inflaction points are suggestive of close monitoring of these instruments.

S&P500 Market Structure Projections

S&P500 Market Structure Projections

Copper Market Structure Projections

Copper Market Structure Projections

US Dollar Market Structure Projections

US Dollar Market Structure Projections

Gold Market Structure Projections

Gold Market Structure Projections

Natural Gas Market Structure Projections

Natural Gas Market Structure Projections

Character of a Composite Day in September

Below is a composite of the net character of all September Biased Market Structure. Each day is netted out to just one imaginary day for each of the databases: 24 QE Era data (Magenta), Inverse Market Structure (Cyan), 20 Year Market Structure (Red) and Bear Market Structure (Gold). What we can see is that if any progress is made in September it generally happens in short bursts of strong days and more than likely very strong overnight sessions. Other than that the general tendency is towards weakness during the day session. Highs like to form int he pre-market between 3:00 AM and 6:00 AM EST and lows like to form in the afternoon in the 1:00 PM to 2:00 PM timing. So, this makes the pulse of the market in September orient around a timing window of 5:00 AM and 1:30 PM with generally only two timing points. This is unusual as it is more usual to have three. However, these structures may be quite useful for trading the rest of the month. We will post additional details for members.

September 2015 COMPOSITE Intraday Market Structure Projections

September 2015 COMPOSITE Intraday Market Structure Projections

Projections Suggest a Significant Turn in September

It has been a wild week or so. We have been asked often recently regarding short-term MSP and why we have not been publishing. The question has been more-or-less: "has the effort of publishing this data ended and is that why short-term MSP has not been published". While it is correct that this data takes a lot of effort to build and is not principally created for the general public - this is NOT the reason that we have not published these data. The reason is that when the markets become as volatile and emotional as they have been, the best thing to focus on is the larger picture and the fundamental near-term emotion and price movements of the markets. Sometimes it takes a few days for the markets to overshoot - which seems to be the case curgently. Markets may be in an altered state of reality...we have been referring to the market being on "METH" the last week or so in the "Lounge". Therefore, we have felt that short-term market structure is more of a distraction then needed and only been referring to it judiciously as it points to highly probable data point inflections and probabilities.

So, what is the bigger picture? It appears that there is a tremendous amount of coincidence pointing to the 3rd and 4th weeks of September. In Gold, the US Dollar, Oil, the Dax, EuroStoxx 50, S&P500 etc...all have confidence for a probability for  a risk reversal in the mid - to latter part of the month into the end of October. Ironically, for risk assets - despite the anarchy going on in the world - there seems to be a predominant bias for a bid in the markets into this coming week - most probably mid weekish. A reaction from these areas are to be most interesting. Some charts have broken down into potential downward impulses and these patterns would usually imply a retest of the breakdown area - which coordinates with the levels charts on the SPX cash posted earlier - suggesting a retest of 2010 at the very low end and up to 2090 on the high-end. 2045 to 2060 SPX cash seem like a serious area to watch. But these price levels have nothing to do with MSP and are just educated guesses.

Another element arguing for further time for upside is that the normal up wave for a 60-minute bar calculated wave is around 155 hours. This would fit well with mid-week. However, given the veracity of the move down a bit more time could be required additionally.

Below are some updates to the MSP charts that cover this probability scenario:

August 30th, 2015 S&P500 Daily & Weekly Market Structure Projections

August 30th, 2015 S&P500 Daily & Weekly Market Structure Projections

August 30th, 2015 DAX Daily & Weekly Market Structure Projections

August 30th, 2015 DAX Daily & Weekly Market Structure Projections

August 30th, 2015 EUROStoxx 50 Daily & Weekly Market Structure Projections

August 30th, 2015 EUROStoxx 50 Daily & Weekly Market Structure Projections

August 30th, 2015 Oil Daily & Weekly Market Structure Projections

August 30th, 2015 Oil Daily & Weekly Market Structure Projections

August 30th, 2015 GOLD Daily & Weekly Market Structure Projections

August 30th, 2015 GOLD Daily & Weekly Market Structure Projections

Other Markets Suggesting Volatility & Dynamic Price Movements Ahead

A look at other markets, such as the German DAX and Gold shows some interesting inflection points coming up and points out the similar dynamics that have been mentioned on these pages versus the S&P500. Additionally, the US Dollar is suggesting market structure that supports a large turn downwards towards September 21st with 5 to 6 weeks of persistent weakness which is possible could be something dramatic.

DAX Longer-term MSP

DAX Longer-term MSP

Gold Longer-Term MSP

Gold Longer-Term MSP