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Critically Important Support at S&P500 1842 – Below Is A Thinzone

We apologize for limited amount of recent articles published on the site. We have been very active in managing, analyzing and examining detailed market activity in the lounge and also sharing via other forums directly with people we care about. At this juncture, the post from last week which showed the 1840 area as key support has now come into play right in the MSP projection timing area. An inflection point is building and should shortly trigger.

However, it must be stated that the failure to liquidate for the extended periods from 2012 to 2015 sets up a severe potential for volatility greater than the volatility we have seen so far. In this analyst opinion, near-term would be something like a capitulatory type of volatility that would likely lead to a short-term reversal. However, volatility is likely to remain elevated as leverage remains under severe stress and overall account equity has continued to drop.

Note that if liquidation occurs today (or tomorrow) as many commodity centered hedge funds, futures managers and investment firms are likely being taken out in body bags, this liquidation will certainly not remain concentrated in the commodity space.

Oil is interestingly putting in a significant low presently according to MSP which is looking for a significant and potentially somewhat extended rally, as a result of this week's inflection point. Initially, it would be believed that equity markets will consider any recovery of oil prices to be positive and therefore, will correlate. However, it is highly likely. After about two and half weeks or so while oil continues to rally the equity markets will likely no longer correlate with that rally and liquidation phase will continue more focused on traditional risk assets into March in what hopefully will be a more lasting low.

Please be especially concerned with the level shown on the charts below. It is this analysts hope that we remain above the 1680 level by 30 to 40 points, and that enough emotional energy is released and leveraged reduced that some short-term recovery can take hold. Ideally, a recovery rally would look like something extremely strong as capitulated. Long's become shorts and are once again trapped. We ideally would look for return to the 1922 1950 area on such rally into early February.

S&P500 Cash Index Levels Chart

S&P500 Cash Index Levels Chart the failure to liquidate

Major Support Dead Ahead – If Broken Support is Virtually Nonexistent Till the 1600’s

MSP, as usual, has done a great job of timing out the market cycles. The next inflection point is projected for around the 22nd of January. Meanwhile we have reverted to BEAR MARKET microstructure on the short term MSP additionally we have a critical set of supports coming up with thin zones directly below them. If these supports break near-term the event brings the potential for lower levels to be reached within the MSP inflection point.

Emotionally, the market is NOT in good shape and lots of cash has been extracted from the market on selling days and this has NOT been replenished on buying days. These are consequences of unbridled gambling by the FED directed global central bank cartel system

No matter the case, we remain extra cautious or short-biased bounces in the near-term till we have the potential for a larger inflection point.

As per the "mcm Real January Effect" we have been tracking since the first two days for the year and confirmed with the first-week market structure and then finally this weeks market structure some pronounced negative company in terms the "Real January Effect" outcomes which presently suggest a interim low in March with yearly lows in October or November. Potential Intra year drawdown is up to 45% if the market confirms these market structures with its January close.

Careful out there.

mcm MSP Projection as Published in Aug/Sept

mcm MSP Projection as Published in Aug/Sept

mcm- MSP Proejctions Actual to Projection Comparison

mcm- MSP Projections Actual to Projection Comparison

S&P500 Levels chart

S&P500 Levels chart

S&P500 Historical Emotional Extremes chart

S&P500 Historical Emotional Extremes chart

mcm Accumulation Components Indexes

mcm Accumulation Components Indexes

 

Immediate Future is NOT favorable for BULLS

This is a quick post to show a variety of MSP charts. All of which point to the immediate area and immediate timing is the beginning of an episode that lasts for several months. There course will be bounces in this decline from our present inflection point. Towards the end of January and towards the end of February or two points to look for bounces in a larger rally in March. Meanwhile, back to business at hand, below are charts of the current detail and close up view for the S&P500, also some overview that shows a preponderance of probability also converging presently as per totally independently calculated MSP for the DAX and Russell 2000.

Happy New Year and wishing you a healthy, happy, safe and prosperous 2016.

Daily/Weekly MSP Close up for S&P500

Daily/Weekly MSP Close up for S&P500

Daily/Weekly MSP German DAX

Daily/Weekly MSP German DAX

Daily/Weekly MSP Russell 2000

Daily/Weekly MSP Russell 2000

 

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.

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

Inflection Point Approaching

We will be posting a detailed article with updates to market structure projection which is suggesting and early month inflection point in December. However, plus or minus two or three trading days would not be surprising. Therefore, while it should be expected that we get a bounce as the new month kicks in, this bounce could be to a high. In either case, market structure projection is suggesting a potentially difficult period or balls ahead so it is a good idea to be alert for any weakness, as surprises are likely to come on the downside.

This article is not about market structure projection. It is about additional information which is representing the quality and behavior of this current move. We have discussed consistently, the Russell 2000 and Mid-caps 400 in the lounge and on the site. Earlier in the week we pointed out that daily resistance cycles would likely trigger if weakness of any decent quality occurred for these indexes. This has been the case, and currently the charts shown below show an unconfirmed daily resistance cycle shown in dark magenta. At the end of today, the cycle will confirm at whatever price marks the recent high and the cycle indication will turn bright magenta. This cycle is significant in a few ways and may suggest a clean rejection of prices if it is respected.

Not to be left out, the equal weighted S&P 500 index is represented below and has been showing ever increasing weakness, which translates to declining breadth, for the S&P 500 components. The index can be seen in cyan below. Additionally, the ratio of the equal weighted index to the cash market capitalization weighted index is shown in red. We can see that during this rally there has been a dramatic underperformance in the equal-weighted index ratio to the capitalization weighted index. All this suggests, less than reliable participation and large liquidations occurring within this up, move.

S&P500 Composite Index to Equal Weight Index

S&P500 Composite Index to Equal Weight Index

Russell 2000 and Midcap-400 Daily Cycle Charts

Russell 2000 and Midcap-400 Daily Cycle Charts

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

MCM Newsletter – Outlook for Week 16-20 Nov

Executive Summary:
- Main Trend (weekly): neutral
- Intermediate Trend (daily): up
- Short-Term Trend (60min&135min): down
- MSP for the week: down
Details:
As highlighted in the previous newsletters, the past week proved to be decisive in the main trend confirmation or reversal. Both ES and YM reversed their down impulse, by getting a resistance level (point 1 on the chart) which triggered above the previous (broken) support level (point 2 on the chart). The appearance of this resistance level has 2 important implications:
1.The impulse down is now reversed, and the weekly cycles are just oscillating (moving in regular waves)
2.The resistance is expected to be quite strong and the normal expectation is for the market to head lower in the next 2-3 weeks until a support level is triggered, if the oscillating nature will hold.

So despite having reversed the down impulse, the market is still expected to head lower in the next weeks. If that does not happen and the market can push through resistance, triggering an impulse up, that would need to be respected. Either way, the resistance levels triggered (2110.5 on ES and 17907 on YM) are now important levels to watch.

weekly_16.11.

Weekly Cycles

The daily cycles are still impulsing up and are currently back-testing their break-out level at 2015 ES and 17100 YM. In the last newsletter we were mentioning ”In the context of the weekly cycles this back-test becomes even more important and is not totally unreasonable to keep an eye out for it next week, considering the MSP.” That is still valid and it is important to see if the market manages to bounce and hold the impulses up or it reverses. The daily is also showing LREs for longs (lower risk entries), so at least a short term bounce is the normal expectation. If the market doesn't even attempt to bounce from around these levels, that would have very bearish implications.

daily_16.11.

Daily Cycles

The 60 and 135min cycles had a significant development also last week. After we pointed out in the week before that they had finished their up impulses with a 3rd END (point 1 on the 135min chart, the 60min is too far back and cannot be seen) they oscillated for a bit and then both broke into down impulses (point 2 on the chart). An additional interesting point is that the 135min cycle had some LREs for shorts (Lower Risk Entries) - point 3 on the chart. These lived up to their name as market retreated quite significantly from there. For next week, considering where the daily cycles are, we could expect some sort of bounce to get a BR (Bearish Retracement), since the impulses down are now clearly established. We will be looking at the shorter time frame cycles (1,2,5 and 15min) for clues if that will play out, since they are fractals of the 60 and 135min cycles, and would normally break into up impulses on such a move.

60&135_16.11.

60 & 135min Cycles

The MSP signaled very accurately the significant inflection point which came up in the market. Perfectly in line with the 1 week left translated MSP, which correctly identified also the bottom back in October, the market peaked in the indicated time window and lost close to 100 points from there. We draw the attention again that now there is bias for weakness for the next 3 to 4 months. This does not mean that there will not be any bounces. It simply means that it is likely that an important intermediate term top was put in and that the character of the market changed, favoring weakness.

2015-11-16_3-19-31_MSP

Market Structure Projection

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

MCM Newsletter – Outlook for Week 9-13 Nov

Executive Summary:
- Main Trend (weekly): down
- Intermediate Trend (daily): up
- Short-Term Trend (60min&135min): neutral
- MSP for the week: up

Details:
As mentioned in the previous newsletter, it seems the weekly cycle decided to prolong the suspense until the last moment and we are now looking to next week as decisive in the main trend confirmation or reversal. The past week had no dramatic change vs the previous 2 weeks, however the Dow cycle is getting now very close to reversing it’s impulse down. The MCM MA is close to crossing back over the impulse down level (point 1 on the chart). S&P is lagging, with both the price and the MCM MA being lower vs the impulse down level in comparison to the DOW. The current movement can still qualify as a back-test of the down impulses, however time is running out and bears pretty much have to turn the market more or less immediately (meaning next week) to keep the down impulse. That being said the main trend is still down, however likely to be reversed if the market holds up or goes higher next week.

weekly_8.11.

Weekly Cycles

The daily cycles continued their up impulses with both price and MCM MA being now significantly above the resistances triggered at 2015 ES and 17100 YM. With the impulse up established, the question is when (or even if) the back-test of the break-out level will happen and how deep will this back-test go. In the context of the weekly cycles this back-test becomes even more important and is not totally unreasonable to keep an eye out for it next week, considering the MSP (detailed below). That being said, the established impulse is up and that can pick up speed so caution is warranted both ways.

daily_8.11.

Daily Cycles

The 60 and 135min cycles had a significant development last week. Both finished their up impulses with a 3rd END (point 1 on the chart) and are currently just oscillating (i.e.not impulsing). Also, both put in support levels, 135min at 2089.25, which was broken by price, but then recovered, and 60min at 2077.25 which held quite well so far (point 2 on the chart). So very short term the direction is neutral to slightly up (if the support will hold), but given the oscillating nature, no clear trend is established. This information becomes more valuable in the context of the daily cycles. Considering that the 60 and 135min are fractals of the daily ones, it could mean that the 1st stage of the impulse up on the daily is over and a sideways or even corrective (the back-test of the impulse up) stance can ensue. This conclusion would be, of course, rendered false if the 60 and/or 135min start new impulses up, but will be reinforced if they start impulses down.

60&135_8.11.

60&135min cycles

The MSP for next week points to a significant inflection point coming up. It is possible that the market has already peaked if the top will be anticipated by 1 week, like the bottom was (point 1 on the chart). Alternatively the market could peak towards the end of next week (point 2 on the chart). Once the peak is in the bias shifts to weakness for the next 3 to 4 months. We have to draw the attention that the MSP is very useful for context and not to pin-point the exact day or hour of a turn. The turn can happen 3-4 days later or earlier and that would be considered close enough. Also, MSP does NOT predict the size of a move. The 3 to 4 months weakness might lead to a 50 points decline or a 500 points decline.

MSP_08.11.

Market Structure Projection