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MCM Newsletter – Outlook for Week 1st week of August

The market moved mostly sideways in the past week, seemingly trying to catch its breath after the relentless upward push. It did manage to make marginal new highs in the middle of the week and Thursday saw an head fake to a new ATH which was then sold hard, the market dropping more than 20 points. The week could’ve ended badly for bulls, but they saved the day on Friday defending Thursday’s lows, so it ended rather muted around the same levels as at the start of the week. The near term EWT picture is complicated now. It’s possible the most recent ATH was a B wave, with the strong selling that followed to be C of a flat. This option would see new highs rather directly. Or it could be that the impulsive move off that ATH is something more. Regardless of which one will play out, Thursday’s range limits are important lines in the sand - both the high and the low.
On the weekly cycles, directionality is moving back up on both indexes, which means bears were unable to change the trend. Nothing much to add except these are looking rather bullish.

Weekly Cycles

The daily cycles are in a make or break situation. Both indexes managed to move slightly above resistances, but not decisively. The resistance levels are important and might still hold, a reversal back below them acting as a warning for bulls that it was just a head-fake breakout. If the market continues to run up and breaks above successful then bears need to sit on the sidelines and wait for another inflection point that might signal a turn.

Daily Cycles

The 288 and 480min cycles    
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MCM Newsletter – Outlook for Week 24-28 of July

The market continued the bullish momentum and pushed to new ATHs after a brief pull-back into mid week. The high of the week was reached on Thursday, with Friday seeing a retreat from there. Like we were saying last week - the bulls are favorites and in this environment it’s very hard (and risky) to call a top. The near term EWT option the bears still have is for this to be a B wave (off the low at 2405). And if that’s what this is, then there are enough waves for it to be complete. Of course, there are also a lot of bullish options out there, so the B wave is far from being favorite. That would change with an overlap of 2440, but that seems very far away right now.

No new development on the weekly cycles. Directionality is starting to creep back up, which would be very bullish if it made it to the maximum level.

Weekly Cycles

The daily cycles triggered corresponding resistances to the supports of 2 weeks ago. ES managed to spike slightly above that, while YM has respected it so far. The normal expectation now is for the market to retreat from the said resistances. In fact YM looks to be doing just that with directionality tilting lower and not being able to push past resistance.

Daily Cycles

The 288 and 480min cycles    
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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