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Updated Daily/Weekly Market Structure Projections

Ready Or Not Inflection Point Approaches as Central Banks Seek to Destroy Bear Paticipation

It has indeed turned out to be an interesting week, with the Fed meeting causing fireworks as should be expected. Clearly, this was a coordinated effort, as posted in the MCM lounge earlier this week. The Fed has sought to cushion "changing of its wording or its intentions" with coordinated actions and hyperbole from other central banks. This is the type of behavior exhibited last year when, in seeking to prevent the per Bernake taper tantrum reaction that had occurred previously, they coordinated with the Bank of Japan, the Bank of England and the ECB to indicate or to actually trigger liquidity programs or accommodation. That sought to offset the impact of the Federal Reserve producing accommodation or leverage. This year has been exactly the same.

Clearly, the impacts of a Fed rate hike can set off a firestorm. There are tremendous risks to the creation of as much leverage as been irresponsibly created and to changing the cycle with reference to this leverage.

The primary risk being that the Fed is actually not in control of interest rates, after all and that a shift can take interest rates into their own direction, regardless of Fed desires. In order to make the Fed policy morph into an illusion of rational deduction and analysis based on data, and to facilitate the appearance of markets interpreting a change in policy as an indication of a sound economic environment, it is clear that the central banks were up to old tricks using unlimited liquidity to purchase risk assets on full bore yesterday. This appears to be yet another tactic "doomed to failure" of these irrational, inappropriate and highly risky policies. Indeed, the actions by the central banks appear to have sought to shake bearish resolve and encourage bullish speculation - and these conditions can obviously be seen in the risk markets presently.

The chart below is the market structure projection chart that we have been publishing for months. It has provided a good guide for the general movements of the markets. Recently is become clear that the markets which sometimes will move plus or minus a week to these projections have consistently been leading about a week since roughly May/June. In evaluating this behavior, we are presenting a chart which shows market structure projection both as it has been plotted and published on these pages - the dark magenta line, and also the same market structure projection plot shown offset by one week. As can be seen, especially in the near-term, these projections have been prescient and accurate. We are now entering timing tolerances shown by the boxed areas on the chart below that are probably for an inflection point. This coming inflection point is a very serious inflection point. Its significance implies a turn from up to down in the markets for the next five months or so - with weakness biasing into February and March next year.

Updated Daily/Weekly Market Structure Projections

Updated Daily/Weekly Market Structure Projections

MCM Indexes General Discussion

The MCM indexes are a proprietary product which indicates not only the emotional state of the markets (via the accumulation index), but also the most important components: the dollars added to the market, the stock share directionality and rich vs. cheap tickets. All these provide important information into the internals of the market and whether the action is healthy or there is reason for a more defensive stance. The basic way to use it is whether the AI and it’s components are confirming the price action or not. So in an up day, the AI should be cyan and going up, the cash added should be positive (the higher the better), directionality green and rising and also more rich tickets than cheap ones.
However there are also more subtle signals, which one can rely upon for short term direction. Below is a good example of such signals.

MCM Index Chart

MCM Index Chart

We can see that on the 8th of October, the market started with quite weak internals. AI was magenta (meaning negative), cash added was negative (although close to 0), directionality negative and rich vs. cheap tickets also negative. Right until point “A” the price action was choppy, cash added was also choppy and close to 0, however AI, directionality and rich vs cheap tickets were all trending up. At point “A” the price in the market tested the lows of the day, cash added tested 0 too, but AI was still trending up and nowhere close to the lows from the beginning of the day, while directionality was also positive putting in a higher low, rich tickets being more positive too. Market rebounded, but came again close to retesting the lows of the day at point “B”. At this point AI was already cyan (showing positive emotion) and with the uptrend quite clearly shown; cash added was positive, went a bit down, but never tested 0, directionality was also in clear uptrend, putting in a higher low; rich tickets had a minimum of the day. After this point, the market never looked back and proceeded to finish very strong. AI and its components confirmed the price action and the day became more of a trend day.
The next day, on the 9th, the market opened strong rallying from the open, however the AI and its components were showing that there is something amiss. Cash added was quite low, the AI itself didn’t turn up to follow the price action, being more flat than uptrending. When the decline happened around 10:00am, cash added went to 0 and slightly below, directionality took a nose dive and tested 0 also, and rich tickets were negative as well. After that the market tried to stage a rebound, AI started to trend up and had quite an impressive upward movement, however this was not confirmed by the AI components, especially cash added to the market which remained subdued and close to 0. Point “C” highlights the fact that although AI was cyan (positive) and trending up, the cash added to market turned negative and remained that way. This is a sign that market participants are optimistic and trying to buy the market, however overall money is being withdrawn which means big players are selling into the optimism. This battle finished on that day as undecided, and the effect was a very choppy market which was not able to move much up or down. It has to be mentioned though that when cash added to the market is negative, that usually trumps the AI, and it could have very well ended with a big down day, if cash would’ve started to accelerate in the negative territory.

Astoundingly Large & Precipitous Losses Hide in the Market Brew – Implying Large Deflationary Forces at Work

In a world of controversial and delusional claims by governments, central banks and economists of recovery and return to sound economic conditions out of the 2009 market and economic crash, this simply is not the case. It can be seen clearly in these indexes, that while nominal prices have been levitated, the actual distribution of return and therefore liquid value, has not. While the S&P 500 is only dropped a small amount since 2014, in reality large losses are being sustained by participants that are similar in size and stress as last seen in 2009.

Currently, we are experiencing a double bottom balance in the MCM Smart Money index, and also the MCM market close index. When this bounce concludes for these indexes, it is likely that the markets will resume a downward trend of these indexes will resume and break the 2009 lows. From all appearances, it would seem that very large deflationary forces, meaning contraction of credit and money is occurring at the very same time as massive printing and leveraging has been attempted worldwide. Clearly, those levitation efforts have failed.

It is important to respect what these indexes are suggesting both on a long-term basis and on a short-term basis. Short-term, it would not be surprising to see volatility in the markets but also a larger effort to metabolize the drop into the August lows. This would imply that after a near-term drop in headline prices for the major indexes, a bounce could continue into November. Via market structure projection, early November is looking like prime-time for the markets and a likely inflection point that will lead to a pronounced decline that is likely larger than the initial foray of August.

mcm Smart Money Index and mcm Indexes

mcm Smart Money Index and mcm Indexes

Reprise of 2007: Bear Impulses Down Likely to Accelerate

The markets are in frail shape. Friday's activity was particularly disturbing in that the markets could not even get the strength to use a prime setup and structural setup to squeeze bears. Markets made a swift reversal out of Buy Extreme resistance starting around 1:00 PM and never really looked back. While a continued bounce is possible very near-term (not that we are saying is likely or favored since probabilities are leaning the opposite currently), longer-term MSP and Daily MSP all suggest downward probabilities for the near future as has been consistently posted regarding this time frame on these pages. We thought it would be, considering the potential impulsive cycle activity developing in the markets, important to look back at the 2007 and 2008 period and topping process via several charts as published below:

2008 Daily Impulse Cycles

2008 Daily Impulse Cycles

2008 Weekly Impulse Cycles

2008 Weekly Impulse Cycles

2015 mcm Hindenburg Omens

2015 mcm Hindenburg Omens

From our post regarding the Janurary Effect in May 2015:

The 2015 January Effect: Status – On Track

Early in the year, we decided to do the most thorough study of all the behavioral and market structures possible to confirm or deny the veracity of the January effect. The resulting study produced the "MCM January Effect Model" with very interesting and powerful results.

The chart shown below puts a dim light on the outcome of this year. The rest of the report produced rather stunning results and to our surprise, proved that using a structured approach to a January effect could reveal market behavioral tendencies that are WAY beyond question concerning validity. Some data outcomes produced 96% win or loss rates with 60 to 70 plus qualifiers in the samples. This means 57 to 67 valid winners/losers out of 60 to 70 fulfilling observations.

This report is being refactored and will be available to members when that process is complete. Meanwhile, the data shown below sheds interesting color on 2015. Though there are a low number of observations out of 100+ samples, the methodology we used we feel is highly reliable which makes these outcomes something not to be taken lightly. Ideal turn timing is mid June to mid July.

So far, the year is tracking all the expectations pretty much as posted on these pages. Note that we have been consistent, not flipping our analysis since our first posts this year. We believe this is a significant difference from most analysis work that we have observed. The reason we are pointing this out is NOT that we need to take credit for acurate analysis during a challenging time for the markets as well as analysts - but rather because the advantages of objective, non-traditional data and structure centric analysis provides more relevant and valuable answers - it's just that simple. Even if such analysis is incorrect, its is still highly relevant because, as a basis, objective, and "fact-based" probabilities can be assessed. Failure to achieve them can be as important as achieving the probabilistic outcomes.

We have consistently posted the mcm-Smart Money Indexes, which have continued to deteriorate and most currently sit at 2009 lows - this is a decidedly troubling and challenging hurdle for the markets to heal as there has been a vicious sell-off going on for much longer than headline prices would seem to indicate.  (see:Drama in the Market Seas and Eye of the Storm: Smart Money Indexes Obliterated)

mcm Smart Money Indexes

mcm Smart Money Indexes

Currently, market facts are NOT FAVORABLE near-term and do not turn for several weeks.

The larger patterns hearken to rhyme with 2007 and 2008 and most certainly call for heightened caution. Central Banking may now have to start focusing on other issues than propping up the stock markets prior to their voyages into destabilizing negative equity as referenced in our IMAGINARY NUMBERS series.

If the impulses that appear to be setting up gain traction there could be quite a lot of damage done in a short amount of time. The primary hope for markets is to bounce NOW to better test the cyan impulse cycle breakdowns or they will most likely require weeks of downward price movement to dissipate downward energy sufficiently as to be able start a better recovery attempt. This is also supported by MSP directional projection probabilities suggesting that after mid-month in October the market is likely try to find footing for a significant upwards effort. Below are current impulses cycles that have been setting up:

2015 Weekly Impulse Cycles

2015 Weekly Impulse Cycles

2015 Daily Impulse Cycles

2015 Daily Impulse Cycles

 

Restrained Market Emotions Corroborate August Drop as Likely Downside Breakout

The VIX is a very dubious measure of emotion.

  • Firstly, it is subject to intense manipulation.
  • Secondly, it only reflects panic on drops.
  • Thirdly, euphoric behavior or panic at tops is not reflected or reliable in any form.

For these reasons, mcm eMotion and market fact analysis tools are much more insightful and reliable. What we can see from the chart below is that the markets are in frail shape and still bullish biased (via orange running cash inflow/outflow) - likely to the detriment of those bulls over the short to near-term. Signs of underlying bullishness will likely fight a good fight and remain as markets drop in the future. However, downside breakouts of emotion triggered hard well before the August weakness as can be seen below [4]. Ironically, emotional commitment on this bounce as well as commitment via funds being allocated to equities are mediocre to average at best...also, shown below [3 and 5]. While people may want to assume that the August drop was capitulatory, share directionality [2] and cash withdrawn from markets on daily basis [1] certainly reflect that illusion. These are in fact, more than likely breakouts and signs of much more to come. The reasons for this is the comparative low emotional fear and panic at the recent lows and the low eMotion and commitment to the current bounce. 

mcm Accumulation Index Components

mcm Accumulation Index Components

Note the nearing breakdown below 2009 lows of the mcm Smart-Money Index, the mcm Market Open Index and the mcm Market Close Index. Given the nature of these indexes, they suggest low balances in investor accounts and thus high leverage in the markets and a breakdown could cause dramatic stresses on the markets system as well as the financial system in general.

mcm Indexes and mcm Smart Money Index

mcm Indexes and mcm Smart Money Index

Exceptional Day and Exceptional Times

Today was filled with outstanding eTickTools triggers, market impulses and emotions. Market eMotions are running at 78% above normal and  we got one x-tick after the other today for exceptional trading. quite amazing really. The changes rolled out and techniques discussed this weekend were extremely useful in trading crash oriented markets. So, on that front, things are quite outstanding.

However, on the market front, we felt that an update of the mcm Smart Money Indexes was in order. There is no shortage of jaw-dropping action represented in these indexes. For all the central banker jawboning, they really have "no real commitment" and are willing to let the people they claim to serve, endure unbelievable hardship. China has all but given up with their ruse and is actively  bankrupting everyone that it can find in order to support the "central planner panacea that all goes back ultimately to the Fed" and which ultimately goes back to theBank of England.

The only account balances that look any ok over the last few years are manipulation accounts (paper accounts of the central banks). Reality is that transactible mechanisms for these cartel members are fast declining, as is cooperation. The net worth and equity of the central banks globally is working hard to press ultimately into negative territory. Cooperation is declining because positive equity and are now moving towards negative equity - money printing in this respect is irrelevant. Though it is imaginable that if you, in a similar situation as the central banks,  could make cooperation aramgements with Prada to trade over-prices and senseless objects dejour with them while you have the perception od viability and they are desperate to sell them. However, if a sustainted period where you and Prada go into negative equity, their inclination to sell is hampered by their inability to do business just as yours would be. So, to go to Prada to spend $100,000 on a bag or sunglasses with -$1,000,000 in the account from which you plan on paying the bill with just an agreement of cooperation with an insolvent Prada who can no longer make, locate or deliver the object you seek is likely to not be a long-lasting venture. Initially, Prada may give try to come up with some terms for them and you to record the sale on their balancesheet, but very soon the mat in front of the Prada store for you and Prada would be gone. So much is similar for a central banker with such decrepit math skills.

The mcm Smart Money Indexes demonstrate clearly that markets have only just begun this move. Many traders may be feeling left out or way too left in. However, the implications are traders resentful of not having closed longs at higher prices are goign to end up quite  a bit more resentful in short order and those who feel like they missed the short of a life time - will soon if they do not focus on the setups that are only JUST BEGINNING. The market move has barely started is not anywhere near complete by all the measures we can see, In the near-term we still anticipate, via MSP data, some strength emerging this week into week 1 of September followed by decline and then strength into the week of the 21st followed by what can likely be a larger cash than the current down move - unless the arrogance of central banker meets cooperation and commitment on a massive scale of course -(which seems unlikely). So, to the charts - further explanation not necessary:

August 25th, 2015 mcm Smart Money Indexes Update

August 25th, 2015 mcm Smart Money Indexes Update

'Building Pretend Markets Not for the Good of the People"
- your friendly neighborhood central banker

From the perspective of a criminal mind, the screen-capture of the Bank of England website below is disturbing on many levels. Firstly, central banks, of all things, should NOT be focused on "BUILDING ANY MARKETS" they should be focused on maintaining the sanctity of the currency and the banking/financial system. It is absolutely stunning that they would admit, in such heavy-handed language, to "BUILDING MARKETS". Secondly, IF one were a large institution or firm of any kind, the choice of words used by BOE implies an objective that just does not fit with an authentic of organic venture. In fact, it implies an effort to convince of something in slight of hand fashion. To sell a scheme - a perspective. Any self-respecting firm would most certainly use any other combination of words than those chosen by BOE: "Building modern markets for a modern world" or "Building Innovative, Advanced  and Safe Markets for the World" come to mind as more of the line of thinking that a normal, authentic non-criminal enterprise might use.

However, a cult leader and or a criminal mind would certainly go through the greatest amount of effort to describe something in grossly deceptive fashion, by using the obvious and simplistic approach of using the very opposite words really apply. And this in a vein attempt to distance from the real agenda or implications. Normally such a technique does not work well or long...hence the word "REAL" and the word "GOOD" must clearly be inverted in the BOE usage, The real operation being undertaken by the BOE is more likely of descibed with the use of  "FAKE" and "BAD" instead. The gaul of this public facing message in these times is truely representative of the thinking en-masse of the central planner mindset - arrogant beyond belief and decpetive beyond reason.

When viewing the mcm Smart Money Index and Gap Index above, consider the implications of the below in understanding what is really occurring.

Central Banks Bravado and Arrogance is so complete that they are not embarrassed to virtually admit the truth

Central Banks Bravado and Arrogance is so complete that they are not embarrassed to virtually admit the truth

Support and MSP for What appears to be a Pivotal Week Coming Up

With the obvious situation impacting the world of total disintegration of central bank cooperation - to expected effect, we now have the addition of extremely high pressure on Chinese investment firms and institutions to sell everything that is not glued down and that is NOT a Chinese asset. If they can not sell a Chinese asset or share without going to jail the next best thing is to apparently blow it up and also to sell non-domestic assets - such as US stocks, European Stocks and anything else that is not glued down that the Chinese officials will not arrest them for. If this capitulation is to continue things can get very messy indeed. But before we throw out the baby with the bath water, let's take a look at what the markets would be expected to do if the third transaction type for fund managers were not "BLOW IT UP".

DAX and Euro Stoxx are at inflection points and can start a large rally and by the looks of things, would potentially be very painful for shorts. Longs are already in pain and it seems they need to sell too just so the pain is shared more equitably. Funny how that is centrally planned. But in any case, there appear to be quite a lot of influences coming up that imply a convergence to the upside that by the looks of things could be swift. IF we can not get the hint of some traction to this structure, then it should be apparent that the brakes are not working and likely the ground is moving which could imply a "crash". Crashes are rare, even though this feels like a crash already, nonetheless, the urge to get emotionally involved in a crash is not usually a highly rewarding one and caution is warranted. It is common for us to stress that most money earned from trading is not on huge winning trades but on normal base hits. We have worked very hard to increase the odds on base hits and to be open to larger trades when they happen. We also have worked hard to developed tools and approaches to handle a crash or very powerful trend. However, it must be restated that smart and judicious trading is far more rewarding than big winners followed by a string of many losses of arbitrary size - usually larger than the large winners, though. This is why we can not overstate that the potential of this change in psychology in the markets will take more than a few days and the opportunity has not even started yet...patience and restraint are highly rewarded. Buying multimillion dollar jet planes before you've closed what appear to be gigantic winning trades is equally unrewarding. So, in all the lessons we can reinforce, patience, discipline, and clarity is key NOW.

Below are various charts that may help put some perspective on where the market is standing. On the Historical eTickTools Emotional Extremes - Support and Resistance Chart note, that one fo the objective is to show thin zones and also to show areas of congestion. Brighter or more intense colors indicate stronger influence, Light colors indicate previous resistances and darker colors are previous supports.

Historical eTickTools Emotional Extremes - Support and Resistance

Historical eTickTools Emotional Extremes - Support and Resistance

DAX Daily And Weekly Market Structure Projections

DAX Daily And Weekly Market Structure Projections

Euro Stoxx 50 - Daily And Weekly Market Structure Projections

Euro Stoxx 50 - Daily And Weekly Market Structure Projections

Oil - Daily And Weekly Market Structure Projections

Oil - Daily And Weekly Market Structure Projections

US Dollar - Daily And Weekly Market Structure Projections

US Dollar - Daily And Weekly Market Structure Projections

The Invitation

by Oriah - Mountain Dreamer

It doesn’t interest me
what you do for a living.
I want to know
what you ache for
and if you dare to dream
of meeting your heart’s longing.

It doesn’t interest me
how old you are.
I want to know
if you will risk
looking like a fool
for love
for your dream
for the adventure of being alive.

It doesn’t interest me
what planets are
squaring your moon...
I want to know
if you have touched
the centre of your own sorrow
if you have been opened
by life’s betrayals
or have become shrivelled and closed
from fear of further pain.

I want to know
if you can sit with pain
mine or your own
without moving to hide it
or fade it
or fix it.

I want to know
if you can be with joy
mine or your own
if you can dance with wildness
and let the ecstasy fill you
to the tips of your fingers and toes
without cautioning us
to be careful
to be realistic
to remember the limitations
of being human.

It doesn’t interest me
if the story you are telling me
is true.
I want to know if you can
disappoint another
to be true to yourself.
If you can bear
the accusation of betrayal
and not betray your own soul.
If you can be faithless
and therefore trustworthy.

I want to know if you can see Beauty
even when it is not pretty
every day.
And if you can source your own life
from its presence.

I want to know
if you can live with failure
yours and mine
and still stand at the edge of the lake
and shout to the silver of the full moon,
“Yes.”

It doesn’t interest me
to know where you live
or how much money you have.
I want to know if you can get up
after the night of grief and despair
weary and bruised to the bone
and do what needs to be done
to feed the children.

It doesn’t interest me
who you know
or how you came to be here.
I want to know if you will stand
in the centre of the fire
with me
and not shrink back.

It doesn’t interest me
where or what or with whom
you have studied.
I want to know
what sustains you
from the inside
when all else falls away.

I want to know
if you can be alone
with yourself
and if you truly like
the company you keep
in the empty moments.


Our invitation is not nearly so eloquent, however, we invite you to some introspection regarding the markets, your trading and our non-correlated, objective and prescient tool-set. In an effort to increase discussion on the blog, comments to posts and participation in the mcm community we are offering for a short time, an invitation to join us and to learn to see "market things" in a new way, a deeper way, a more authentic, unique and honest way. 

mcm tools are not "see-ers" or random predictors, signals or neural networks that increase your frailty with each step. Every piece in our toolset reinforces the other. An MSP does not track is as useful as that that does because these are true probability analyses - not random guesses regarding the future or its potential. Similarly for emotional extremes with eTick-Tools, these are not lines on a chart but emotional capitulations where market participants are measurably stressed. Reactions at the areas are real and objective points to leverage the conviction and opinions of participants. Its the same with market cycles and our market internals - each look at pieces that no other analysis does in an effort to understand a deeper meaning - perhaps even what the market is like in its most empty moments.

Join Our Community by Clicking this Link - No Fees - No Credit Cards - No Gimmicks and No Unnecessary Commitments

Intraday Projections: Fading Fast

Today promised should be an interesting day. Participation and internals yesterday were horrid. Most buying was done by small trade ticket buyers. Market structure was also sloppy. We tracked intraday MSP extremely well getting an early morning high, and 10:30 AM low a move of over 20 points ES - however, lows should have continued into 1:30 PM. Timing works its magic of course in that the highs of the cash session was 1:24 PM and led to an impulsive decline in the close.

Additionally, e-Tick Tools generated amazing emotional extremes. 93% of emotional extremes lead to 3.25 point ES moves - more than enough to make a nice living. Yesterday's triggers lead to much more than that. The preferred approach is to trade with some running contracts but to book profits incrementally into the average reaction which is around 5 to 7 points. All of our automated trading systems use this convention - using a process called trade reticulation. The biggest problem with most discretionary trading is being enamored with the big large point winners. This is not productive as it leads to consistent losses and large ones at that. The best way to trade is to BOOK PROFIT RELENTLESSLY as my systems do. Yesterday emotional inflection points were triggered, and executable to 16 to 18 points easily - how many trend traders can capture nearly 20 points in a day without taking a few 5 to 7 point losses or worse? BOOK PROFITS - regardless of timeframe - this is the biggest mistake of discretionary traders. 7 points is the diffusion target currently on ES and 7 points is a LOT OF MONEY.

Bias is negative for the AM session versus yesterday's AM session on the daily MSP chart posted earlier in the week - this condition has been fulfilled presently as of the publishing of this article. Overnight session promised chop, and it has delivered. If no early AM bounce appears the most bearish case for today becomes the highest probability [GOLD MSP on chart]. Strength materializes into the open that should be reverse around the open prints into swift weakness. In all cases, watch for 11:30 AM lows and a fairly useless day after that.

From today's lows, wherever they occur, modest positive bias on Daily MSP projections exists into Monday AM. However, next week probabilities turn decently negative after that into midweek.

August 14th, 2015 Intraday Market Structure Projections

August 14th, 2015 Intraday Market Structure Projections

The Bigger Picture – More Chop in a Seemingly Endless Chop

Down 100 points, up 100 points - pretty soon you can be talking about real money. In this market, however, the real money is being lost by market participants unable to grasp the larger direction who are getting stopped out at every centrally planned levitation point or fear-laden drop. So, last weeks lows, from our perspective should have been near the 2040 area - possibly nearer to 2010 - they were short and put in so far a higher low. However, since at mcm our analysis does not really get decisions based on support and resistance or wave counts but rather by implications of eMotions and definable probabilities, it appears that we are now on the reversion trip back into chopsville. It is still possible to get an intermediate short-term drop to test lower levels, but the energy on the downside has been dissipated. Though for the near-term, market movements may be constrained within out 120 point chop zone, probabilities are favoring an early September spike that will most likely not last long. 

August 10th, 2015 Daily & Weekly Market Structure Projections

August 10th, 2015 Daily & Weekly Market Structure Projections