S&P500 Market Structure Projections

S&P500 Market Structure Projection

S&P500 Market Structure Projection

Since, people are sufficiently frustrated and confused to be heckling and both negative implication and positive implication posts and articles. I figured it was time to update the market structure projection as we are getting a balance within a downtrend. The bounce is larger than I would have preferred but most likely is a bounce meeting a downward push. Normally, the first few days of December are probable of being bullishly inclined, hence the question of whether the low that we got last week was dramatically left translated as shown in the first box on the start or whether it needs to average to itself somewhere in the middle around the marked [1] comes up. Currently, systems that were holding long trades closed out yesterday at the close, which suggests that this rally is ripe. Moreover, we are approaching a time when people are looking for Santa Claus, yet all the data. This analyst sees suggests Santa Claus may not have quite so much spry in his step this season. We are entering the phase of weakness mentioned on these pages over the last weeks, which suggests downward bias into February or March next year. The posted NYSE charts also provide anecdotal evidence that we are at a pivotal market point. We suggest that you take a look at those charts again as the Hindenburg omen's their placement timing and patterns overall are concur with market structure projection at this time.
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Now That Everyone Need Never Worry About Equity Market Risk – Is the Worry Over?

"Nothing shall interfer with risk markets" is now the popular determination...after the largest terrorist attack in years combined with horrendous economic data produced a large bounce - why worry? 

We tend to believe that this compunction is in for some more testing and that intervention will only go so far. VIX was in a position where, despite giving a valid signal, it is of a low-quality variety that would usually lead to a bounce but need a secondary signal for a larger and longer reaction. Having reach our 2010 to 2015 target the S&P was entitled for a bounce as  would be normal for retests of previous upward impulses on the daily charts. Our systems that took longs into this area are not virtually flat and will close these trades at any time. This also would fit the MSP timing.

The NYSE is in a remarkable bearish Head and Shoulders pattern that virtually no one seems to be focusing on. and moreover, the shorter-term pattern shown below is not too bull friendly either. The fact is, that we broke out into a thin zone with what would be called a full test. The normal and highest probability reaction for these types of event is a drop through the thin zone to the next supports as can be seen on previous events on the chart.

S&P500 Daily and Weekly Market Structure Projection

S&P500 Daily and Weekly Market Structure Projection

S&P500 and VIX Buy Signals

S&P500 and VIX Buy Signals

NYSE Levels Chart

NYSE Levels Chart

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

Stair Step Down Likely Begun for DAX into March 2016

Not only has risk shifted for the US equity markets, but European equity markets like the DAX and the EUROSTOXX50 have also begun stairstep down patterns. This implies rallies will be to lower highs drops will be to lower lows within an overall larger downtrend. From the appearance of things the situation should remain intact until March 2016. With the largest declines for the DAX coming in December. This analyst also expects a shockingly difficult December for the US stock markets is the Santa Claus effect is likely to be muted at the very least. The DAX market structure projections can be seen in this chart have been highly prescient, with general timing,  direction and weakness suggested into the end of the month which could become severe for the index. The possibility includes a lower low below August lows being a not insignificant probability. This event would imply a breach of August lows for other European markets, and quite possibly US markets.

As mentioned regarding the US markets, if treasuries begin a rally and exceed the August highs, then it would not be surprising to the US indexes below or at the August lows.

DAX Daily and Weekly Market Structure Projection

DAX Daily and Weekly 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

While Everyone Is Looking up – It Appears to Be Time to Look down for Quite Some Time to Come

At this time, despite just about every analyst, save a few, that we are aware of looking for new highs, we wish to point out that the risks appear to be to the downside well into next year. Just as the rally from August fooled the likes of high-profile analysts such as Tom DeMark, who expected the market to drift down through September and into October, and the abundance of wavers looking for fifth wave lows below 1825 - we do not expect that the market will want to be any more obvious for anyone than it was in August. However, as can be seen in the left translated market structure projection shown in blue on the chart below, while the persistence and lack of pullback of this move may have been a bit of a surprise for this analyst - the move itself, followed our general expectations nearly perfectly.

The implications of these projections are significant in that the next week or two are large potential inflection points for many markets. These inflection points are likely to carry weight for many months to come - not to mention disappointing the abundance of analysts and market participants looking skywards. Below is an updated market structure projection chart and we are now knee-deep in the turn window inflection point.

Also, please note that the BEAR IMPULSES PREVIOUSLY DISCUSSED ON THESE PAGES ARE STILL WORKING AND HAVE BEEN SO FAR ONLY BEEN RETESTED. The implication is that until these bear impulses fail, the larger direction and risk for the markets is down. We expected a retest in the 2060's  vicintity/area was a probability given the norms for impulse structures to retest their breakdown points. However, on the weekly charts we have overshot somewhat the impulse breakdowns by a little bit - although it has barely visible on our weekly charts (charts in a post we will publish tomorrow)...the impulse retest has indeed provided resistance to the ES futures and is a very good point for the market to do some soul search and to rediscover and begine the next phase of its larger bearish if it wishes.

We sent out an alert last night to members informing them and reminding them of the gravity and potential of this inflection point and also of the shorts that systems were triggering the close yesterday.

Daily and Weekly Market Structure Projections

Daily and Weekly Market Structure Projections

MCM Newsletter – Outlook for Week 2-6 Nov

For the benefit of the general public, considering that we are approaching an important inflection zone, we will keep this post open, however the future weekly newsletters will be limited to members.

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

Details:
No significant change in the weekly cycle compared to the previous week. The impulse down which started in week 35 is still valid - the price sliced through the support level which triggered at 2061.75 ES and 17353 YM (point 1 on the chart), confirmed afterwards by the MCM MA (which also came down through the mentioned level). That means that the main trend is still down. Compared to last week, the price advanced a bit more above the break-down levels (point 2 on chart), however not significantly enough and the current movement would still qualify as a back-test of the down impulses. The past week did little in terms of confirmation, so we are looking to next 1 week, possibly also the week after, to either confirm the main trend down or a reversal.

Weekly Cycles

If the weekly cycles did little in terms of confirmation, the past week brought a significant development on the daily cycles. Namely the MCM MA confirmed (point 2 on the chart) the price break-out (point 1 on the chart) above the resistances triggered at 2015 ES and 17100 YM. That means that the cycle impulse up on the daily is confirmed. The impulse is still at an early stage, and it can be reversed, especially considering the weekly development. Which is why also on the daily what happens next week appears to be of critical importance for the intermediate term direction.

daily_1.11.

Daily Cycles

The 60 and 135min cycles added even more nests to their upward impulses, by breaking above the END (or 2nd END) of their previous up impulses (point 1 on the chart). Currently the 60min has put in a capitulation bar (yellow bar on the chart) with a support level right at the lower end of the bar at 2069.5 (point 2 on the chart). Interesting is that 135min has resistance turned support very close, at 2066.75 (point 3 on the chart) and if we bounce higher from here, this would qualify as another back-test of the up impulse generated there. So very short term a bounce is the most likely option shown by the 60 and 135min cycles. If the bounce does not materialize and we break below the indicated levels, that would be important since it would reverse the impulse up on 135min and generate an impulse down on 60min (after MCM MA confirms).

60&135_1.11.

60&135min Cycles

The MSP for next week points higher with a significant inflection point coming up if it has not already occured. After the market peaks there is MSP bias for weakness over the next 3 to 4 months. When pointing out inflection points in the long term MSP it is important to mention that + - 3-4 trading days would be considered close enough. Friday is shown on the MSP as the peak, so we can conclude that the likely top is sometime in the 2nd half on next week or, if it's later, in the 1st half of the week after.

Recently the markets have been leading/left translating their peaks and the market IS presently in the window for a turn...it is not the objective of MSP to pick the exact hour and day of an inflection point but rather to point out a region of probability - be alert to any clues that a turn is occuring.

 

1.11.ES_MSP2

Market Structure Projection

End of Octobe/Early November Inflection Points

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

S&P500 Market Structure Projections

S&P500 Market Structure Projections

Copper Market Structure Projections

Copper Market Structure Projections

US Dollar Market Structure Projections

US Dollar Market Structure Projections

Gold Market Structure Projections

Gold Market Structure Projections

Natural Gas Market Structure Projections

Natural Gas Market Structure Projections

A Look At October So Far

Daily and weekly market structure projections have provided a decent insight into the markets over the last few weeks. In the chart below, we have shifted market structure projection earlier by a few days. This is tracked well. However, we may be in a larger countertrend pattern such as a rising wedge which would coordinate well with the concept of termination of the pattern towards the end of October or early November. Within this structure is an abundance of skew towards day to day downward price movement. As can be seen in the highlighted box and also the abundance of down projections on the daily MSP. The interesting thing about the daily MSP is additionally that it shows the potential for large spikes upwards within this skew of downwards movement. We have suggested consistently over the last weeks that upward movement may be quick and outsized due to events or Federal Reserve central bank announcements interspersed within a general downward bias. The result of such action can still mean that the market make some forward progress but may be very frustrating to bullish traders.

Daily and Weekly Market Structure Projection

Daily and Weekly Market Structure Projection

OPEX Intraday MSP Projections

OPEX Inflection Point? Friday Intraday Projections

This week's options expiration activity matched 20-year expectations for market structure production. With strong rally shown in red starting at around 11 AM. The data shown below is specific to options expiration week behavior. So far, options expiration Friday is following the market structure projection normals, which are indicated by the red projection on the chart below. Normally, acceleration occurs in the 2 PM area specifically in the last hour and a half of options expiration Friday. In this case, the edge is for a down in reaction. However, take note that in strong bear market moves where options expiration has been proceeded by. A weakness the last hour and a half to two hours of the Friday expiration can be a relatively sharp upwards reaction. This is not expected today, as our desperate and panicked central bankers have done a fine job of messing up the best-planned option positions into this week.

As a note, yesterday was a very unusual day with the tools triggering the equivalent of the strongest buying efforts in the last 15 to 20 years. This registered with a 100% percentile X-Tick and a breakout over this emotional buying extreme for one of the strongest buying panics and buying capitulations that we have witnessed. This was truly extraordinary if not a bit shocking, especially given the limited amount of cash that flowed into the market yesterday. Generally, mcm expectations for this week were for a consolidation week from last week's highs followed by a further upward bias grind into early November. Yesterday's buying panic, however, especially when combined the pending low expected in the dollar, sets up the risk markets for some significant headwinds. Though edges into November in the equity markets are positive, probabilities favor day-to-day weakness with large spikes interspersed between – most likely triggered by hyperbole from our central planning contingent.

OPEX Intraday MSP Projections

OPEX Intraday MSP Projections

Weekly Cycle Charts Explained

First some basic information about interpreting the cycles:

  • cycle movements are like waves in nature. The stronger the wave, the more dissipation is needed to release the built-up energy
  • there are two types of waves: "Cyclic" and "Impulse"
  • a magenta line is indicating the peak of a cyclic wave, otherwise said, a resistance level
  • a cyan line is indicating the bottom of a cyclic wave, or a support level
  • a cyclic wave generates a bottom at a cyan line and correspondingly, a top at a magenta line
  • the green line (which turns red in downtrends) is the MCM Moving Average
  • a cycle impulse is confirmed once the price AND the MCM MA move either above a magenta line for an uptrend or below a cyan line in a downtrend.

The current trajectory of the weekly cycle chart on ES is a perfect example of how powerful a cycle impulse can be and what is the typical behavior.

Weekly charts

At point “A” the price moved above the resistance (magenta line) indicating a possible cycle impulse up in the making. At point “B” the MCM MA moved above the resistance (magenta line), confirming the cycle impulse. Once a cycle impulse is confirmed, it usually back-tests before really taking off. This happened almost perfectly at point C, when price came quite close to the magenta line and previous break-out. After that it was clear sailing, with no signals generated to indicate a turn or potential change of the main trend. At point “D” a Bullish Retrace (BR) was triggered, which normally needs an END to finish. The BR and subsequent END higher indicate that the cycle impulse might be coming to an end. Typically an END is enough on longer time frames, but it is common for also 2nd END and 3rd END to trigger. In our case the BR triggered at point “D” had an END, then another BR triggered and 2nd END and at point “E” we had the 3rd END. At that point, the cycle impulse was finished. The price went lower, a cyan support level was generated and broken, turning into a cycle impulse downward at point “F”.

The Dow cycle chart is a bit different, although it moves very much in sync with ES. Dow was already in a cycle impulse upward and had a 3rd END generate at point “G”, which coincides with the timing of point “A” on ES. The price broke above, the MCM MA also, and that became a nested impulse up. Dow had an earlier BR and 1st END (at point “H”). After that it also had a 2nd END and 3rd END, which signaled the end of the cycle impulse. After that it generated a cyan line and a corresponding magenta line, which signifies a regular “wave”. Another cyan line was generated, which was then broken by both price and MCM MA at point “I” signaling a cycle impulse downward.

Is More – Less? – Central Bank Policy Fears Appear Ready to Create a Large Quanity of LESS

Confusion over central-bank policy, financial system leverage, economic stability/prospects and impacts of quantitative easing, have created volatility and triggered an epic short squeeze. As confusion reigns and bulls become bullish they may attempt to attribute advancing prices to fundamentals or to expected central-bank policy for support. However, it appears that the US Dollar may find a bottom sometime this month and rally strongly into January. The initial start of the dollar rally appears likely to be composed of something of a shock. The question is will the markets believe it? Additionally, for this analyst the question is "will the markets be able to deal with it?"

Near-term, however, it is important to state that equity markets are poised for a pronounced decline for a week or possibly more which may be arrested at that point and rally again towards the early November.

US DOLLAR Market Structure Projection

US DOLLAR Market Structure Projection