mcm-Alex

mcm daily market update 16.Aug.21

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ST trend: down

On Friday we were mentioning that the ST trend was up, with potential pullback set-up, as FGSI was at extreme optimism. The pullback was small, then the market pushed to new highs in a very choppy session. It also made a new ATH after hours. The Sunday session saw a pullback from there (the ATH was marked as unconfirmed high on FGSI).

The current o/n saw continuing weakness and what is interesting is that for the first time in a while, the buyers were not able to lift prices back to new highs out of FGSI trips to extreme pessimism. What is more worrying for the buyer side is the fact that 2 unconfirmed lows on FGSI were subsequently broken. That usually marks a shift in market character (i.e.to something more bearish in our case), so it's a big warning that buyers are no longer in full control. ML was also broken by price and now appears to be holding as resistance. That also confirms a more bearish ST picture. Going fwd, it is important to see how price acts in relation to danny and ML. For buyers to get back in control, they must break back above ML. if they can do that, this might be another failed breakdown from seller side. However if ML continues to act as resistance and price continues lower, this might be the 1st trend down day we had in a while. This week is OPEX so shake-outs in both directions are to be expected. Considering that markets are so extended, a bigger pullback would not be out of the question (1st target 4408-4415 - large fractals on 60 and 135min cycles. Below that - 2nd target is 4370-4380 and the bottom of the prior trading range).

mcm-Alex

mcm daily market update 13.Aug.21

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ST trend: up (with potential pullback set-up)

Yesterday we were mentioning that the ST trend was up, with a potential topping pattern, as both FGSI and IGSI were showing unconfirmed highs. The market did pullback from there and even overshot ML for a brief period. FGSI reached extreme pessimism and as usual buyers stepped in there with authority. They won back ML and after that there was no looking back, market going straight to new ATHs.

In the o/n price went sideways and unlike the previous sessions, we had almost no pullback. The new unconfirmed high on FGSI from yesterday' session was broken and ES just made a new ATH. FGSI is at extreme optimism again, so a ST pullback is to be expected, however buyers have been extremely strong and the trend is up, so unless danny or 400bar MA fail to hold as support, it is dangerous to try to anticipate a turn. Once these do fail, it is likely we will see another ML test, but until then - the trend is up.

mcm-Alex

mcm daily market update 10.Aug.21

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ST trend: neutral

Yesterday we were mentioning that the ST trend is neutral, as both sides were inefficient via FGSI. Since then we had spikes higher and lower, but price went basically nowhere. Yesterday's cash session did finish higher vs Sunday's o/n, so up grind is still holding.

The o/n brough the "usual" vertical price drop which pushed FGSI to extreme pessimism, where buyers stepped in. Price went then back to where it used to be. In conclusion, it seems to be "steady as she goes" as price keeps grinding higher with the ocasional steep drop. ML is still below price and being defended, so until sellers can break below and sustain a breakdown the ST trend is up.

mcm-Alex

mcm daily market update 02.Aug.21

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ST trend: neutral

On Friday we were noting that the ST trend was down with bottoming attempt. Buyers did manage to hold those unconfirmed lows on FGSI and pushed higher into the cash open, before grinding and giving up some of those gains in the 2nd part of the session.

The o/n from Sunday and today saw buyers stepping in again and pushing prices back to the 4420 area. That zone has been a brick wall of resistance so far, price being rejected every time it got there. Today same thing happened with price dropping abruptly fro mthere right into an ML test. What happens from here is important for the near term. ML is key for the trend, as we keep repeating. Buyers would want to see ML holding and pushing back above danny and 400bar MA to put in a successful ML test. If danny or 400bar MA reject price, then another attack on ML is likely, while an ML breakdown would put sellers in the lead. We do have an unconfirmed high on FGSI at the recent o/n high, so a bigger turn could shape up from here, but it depends on whether ML can be broken on a sustained basis or not.

mcm-Alex

mcm daily market update 23.Jul.21

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ST trend: up (with potential ST pullback)

Yesterday we were noting that the trend was still up, as sellers were inefficient, but were warning that a pullback could be coming to test ML as FGSI was showing an unconfirmed high. That is exactly what happened. The unconfirmed high on FGSI led to a pullback into a ML test. The test held quite comfortably (ES never touched ML, while YM overlapped it briefly) and from there the buyers launched another push higher.

The o/n saw continued upward pressure as buyers kept making higher highs, while sellers were inefficient on pullbacks. The main achievement of the buyers is that now they finally broke the initial bearish EE level on IGSI. They also broke the closer unconfirmed highs on FGSI and turned them into confirmed highs. Price is also very close to the ATH, so the trend is clearly up. For the immediate term, we do have FGSI at extreme optimism, so a pullback could happed anytime from here. However, it depends how price will act on the TT lines (momentum, danny and 400bar MA). As usual, if danny gets broken, then a trip to 400bar MA below would be expected. If that also gets broken, then another ML test might be in the cards. As long as these lines hold, we could continue higher with only shallow pullbacks, depending on how FGSI shapes up. IGSI has a lot of room fwiw.

mcm-Alex

mcm daily market update 21.Jul.21

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ST trend: up (with potential topping pattern)

Yesterday we were noting that the trend was neutral as both sides were showing inefficiency via FGSI. Because of the set up on all ST GSIs (FGSI, IGSI and MGSI) we were mentioning that a bigger low might have formed at Monday's lows and that yesterday's action would be key for the intermediate term. ML being the main line in the sand for the trend. The buyers did everything right after the cash session open. They broke above the opening BE and then simply sliced through ML and never looked back. The breakout was very strong and considering the bigger low potential from Monday, the buyers are now back in control.

The o/n continued to show the buyers are regaining strength. It continued to make new highs and most importanly - the IGSI "reloaded" quickly on a small retrace, triggering a very large bullish EE. With ML below price and continuing to be drawn higher and higher, the sellers need to be careful here and wait for a clear set up before trying to jump back in. We do have FGSI at extreme optimism, so an immediate term pullback could occur from here. Momentum line and danny will be the clues if that will occur, as they would need to give way. So far danny has held support very strongly, so it won't be an easy feat for sellers to pull off. If danny gets broken, an ML test would be expected. That would be the inflection point. There is still a slim chance this face ripping rally off Monday's lows is just a dead cat bounce, but it is getting very slim. Only a break below ML would tilt the odds back towards that bearish scenario. Buyers need to defend ML at all costs, while a green day today would be ideal (follow through to yesterday).

mcm-Alex

mcm daily market update 20.Jul.21

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ST trend: neutral

Yesterday we were noting that the ST trend was down, with a potential bottoming attempt (as FGSI was showing an unconfirmed low). We did warn that the bottoming attempt was only a potential as if sellers continued to push, that could have been broken. Sellers did just that and continued to break lower almost the entire cash session, until the last 30min when buyers stepped in and staged a larger bounce. The follow through on the downside after Friday's bearish session is a serious warning a larger shift is at hand (from full-on bullish to a bearish stance), so longs do need to be careful here.

The o/n continued higher building on the late bounce from yesterday and a bigger dip showed sellers were inefficient, so the trend went back to neutral. Boths sides are inefficient as shown by FGSI, so the ST trend is up for grabs. A ST bounce after the sell off from the last 2 days should be expected. The only question is if it's just a dead-cat bounce or are buyers ready to step back in with authority. We do have the potential for a big low at yesterday's lows with IGSI and FGSI showing that low to be unconfirmed and MGSI touching extreme pessimism there. So there is a possibility that the correction is done and market runs back higher. However buyers need to prove themselves now, as the last 2 days were showing a change in character with the bounces failing. ML is, as usual, our main line in the sand for the trend. It was decisively broken on Friday and yesterday there was only a feble attempt in the o/n to touch it. So the ST trend was clearly pointing lower. Now this bounce took price right to ML and it's just whipsawing around it. That means the current area is an inflection point. Depending on which side of ML the price will settle will dictate the near term trend. The bullish and bearish EE levels on FGSI will be additional confirmation after that.

mcm-Alex

mcm daily market update 9.Jul.21

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ST trend: up

Yesterday we were noting that the trend was down, but with a potential bottoming attempt as FGSI was showing unconfirmed lows. Turns out the actual low was a few points away on yet another unconfirmed low on FGSI, then market bounced again very strongly from there. However, differently than in the other situations in the last 2 weeks, the bounce was stopped by ML which held as resistance.

The o/n came to the buyers' rescue and after a sideways action both up and down, there was yet another strong bounce which did manage to break back above ML. Now, as I have been repeating like a broken record - ML is key for the near term trend. Buyers winning back ML is a strong statement they are trying to get back in the lead. FGSI is showing an unconfirmed high at the o/n high and market pulled back from there to test ML once more. That triggered a pretty large bullish EE, so now this is where it gets decided. ML is the big inflection point going into today. If buyers manage to defend it and bounce, then the trend is back to up and we could be getting back to the usual up grind. Especially if they can turn the unconfirmed high on FGSI to a confirmed high. However, if price breaks back below ML then that would signal more bearishness ahead.

mcm-Alex

mcm daily market update 8.Jul.21

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ST trend: down (with potential bottoming attempt)

Yesterday we were noting that the ST trend was up, as buyers stepped up and held a bullish EE set up on FGSI and broke a bearish EE one. We did get a bigger head-fake drop after the cash market open, which broke below ML, but that break was again bought right back up. Price broke a BE which triggered right below ML and danny, so once that triple resistance couldn't contain the bounce it was clear that buyers had regained control. Market proceeded then to make new ATHs after that.

The o/n today brings a nasty surprise for buyers. The new ATHs were sold strongly. The market dripped initially back towards another ML test and FGSI showed big bullish EE vs yesterday's low. However what happened next on FGSI was key. Buyers were very inefficient on the bounce off ML and FGSI moved back above the center line with almost no price movement. That was the key signal that something is wrong with the up trend and once ML was broken down there was no looking back. Danny capped price action the whole way down and even if FGSI bottomed in the extreme pessimism zone the market continued to move lower. Right now we do have extreme pessimism on IGSI and FGSI, with FGSI showing an unconfirmed low. So that puts a potential bottoming attempt on the table. However as long as danny (and momentum line) keep capping price action, the market can continue to make new lows. Danny is key in the ST for an attempted bounce.

mcm-Alex

mcm daily market update 7.Jul.21

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ST trend: up

Yesterday we were noting that the ST trend was neutral, but the set up was there for a bigger correction. ML did give way and we did get a decent decline, until the market found a bottom at an unconfirmed low on FGSI (alerted in real time in the mcm chat room). Buyers stepped in strongly there and after breaking an important emotional area with 3 exhaustions (2 BEs and 1 SE), they pushed price directly to ML and broke back above.

The o/n saw a bit of consolidation after the big bounce off yesterday's LOD and for a while the trend was neutral, as both sides were inefficient via FGSI and we had both bullish and bearish EE setting up. However it was again buyers who took the lead, they held the bullish EE and broke through the initial bearish EE level. ML continues to move higher (pushed by price) and is the key for the trend. As long as buyers can keep price above, the trend is (back to) up. Losing ML would be a serious warning that we might get another attempt at more downside, but at the moment yesterday's LOD looks like the end of the near-term correction.

mcm-Alex

mcm daily market update 06.Jul.21

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ST trend: neutral (with bigger correction potential)

On Friday we were noting that the trend was still up, as ML continued to hold and FGSI continued to paint confirmed highs. That pointed to the usual upward bias going into a long w/e will play out and indeed it has, with the market finishing with a new ATH.

However the up squeeze from the 2nd part of the cash session triggered a bearish pattern in FGSI, namely a 45 degree angle divergence. When these large divergences between FGSI and price happen, they are normally bearish as they indicate determined selling so basically distribution as the price goes up. This type of pattern was followed text-book until now, as price retested the divergent high and was rejected there. Now buyers look inefficient via FGSI. We also have additional warning signs. On the retest of the high (which actually made a minor new high), we had large unconfirmed highs on IGSI, MGSI and also FGSI showed an unconfirmed local high. All pointing to the POTENTIAL for a bigger turn. ML is being tested now and as usual, it is the key for the near term trend. If sellers break below ML, that would be a big warning that the 45 degree angle divergence on FGSI is indeed playing out (pointing to a larger decline). Buyers would need to best the o/n highs and run a bit further to cancel the bearish potential. Right now this looks like lower odds though.

mcm-Alex

Lessons learned part 4

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The past week (21-25th of June) we had a very strong week and a powerful melt-up off Sunday's OPEX lows. Those lows were announced on Monday in the am on the daily blog post with the mention "This set up has the potential to mark an important bottom and trigger an explosive bounce". That came to pass and the market relentlessly pushed higher, with only small pullbacks. Because the short term GSIs (Globex Sentiment Indexes) caught that potential, it is time to look more closely at these kinds of set-ups and see what provides confirmation or non-confirmation.

First, let's look at FGSI, which because it's the fastest will usually trigger the set-up first and will also be the 1st one to confirm. The chart below was the one posted on the blog on Monday, June 21st. As we can see we had a large unconfirmed low, the market rallied right into a bearish EE (excess energy) level, hesitated briefly, then broke through it. That was the confirmation that the unconfirmed low would hold and it is a bullish breakout from there (roughly 4154ish).

Now let's have a closer look at an earlier set-up of an unconfirmed low, which failed, namely the Friday morning low. We had a pretty large unconfirmed low (although the set up was not as ideal as the one from Sunday, as the lows were too close to each other, not to mention the IGSI and MGSI set-ups). And then the ensuing bounce was showing that buyers are inefficient, as price barely bounced 20 points off the lows, but FGSI was already above the centerline and triggered a very large class B bearish EE vs the last time FGSI was in that area. Price then whipsawed from that area back towards the unconfirmed low where buyers made another attempt to stick save that low (where the green arrow points). The bounce triggered a bearish EE which held and then the breakdown happened.

So the main lesson here is - whenever we have an unconfirmed low (or high), that shows the potential for a larger turn. But the key to that potential playing out is how price acts when we have an EE set-up after that. Breakout/down of that EE set up is the confirmation that a larger turn is playing out.