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

Finishing with a Flourish? Projections Suggest Weakness Ahead

We are approaching key areas as shown on the Levels charts. 1990 to 2010 is a significant area on the SPX cash index. It would be reasonable to expect a reaction from this area. Additionally, market structure projection suggests early strength is likely to be dissipated into the afternoon. Moreover, Wednesday and Thursdays directional bias is significantly weaker. On top of market structure projection suggesting weakness ahead, which could be pronounced - we have the moon cycles – which are approaching the last moon and a new moon series. A weak reaction to the last moon could intensify the reaction to the new moon. Below is a chart of market structure projection for the intraday, which suggests timing around 10:30 AM and 2 PM. Either area is a valid place for the market to turn from upwards to downloads, 10:30 AM is the higher probability. However, to put things succinctly, the general expectation is latent morning strength leads to afternoon weakness.

Other data to note, is that the bias for strength this month ends on the fourth trading day of the month - this is where he currently sits. The implication is not that the market needs to fall apart after that, but rather that upward potential wanes. In this case, given the size of the retest of the currently working bear impulses a pronounced reaction would not be surprising. We want to reiterate again, that this rally does not fit into the structure of a bull market presently due to the working downward impulses on the daily and weekly charts and also the bias of the systems towards "bear market" predisposition.

Oct 6th, 2015 Intraday Market Structure Projections

Oct 6th, 2015 Intraday Market Structure Projections

SPX Cash Levels Chart

SPX Cash Levels Chart

As Expected, Bear Impulses Continue Last Week’s Retest Before Next Drop

As, posted last week in this post: Bear Impulses Retesting Before Next Drop, and this chart, significant retesting of a the currently in-progress downward BEAR IMPULSES should be expected. We indicated that testing in the 1990 area would be normal/ideal - and preferred between 1950 and 1990. Though it is totally normal for impulses to retest the breakdown point directly, in this case, that is NOT the highest probability outcome and would expect a retest that looks similar to the retest of the upward impulse shown on the chart below, but as stated in last week's post the option of a direct retest of the breakdown must be respected.

We are presently looking for BEARISH RETRACEMENT triggers (Magenta BR Labels) on the Daily and Weekly charts which will likely lead to pronounced weakness and subsequently the dissipation phase of the current Daily and Weekly Impulses.

We had a tremendous week last week in the lounge, with prescient and powerful signals triggering for upside into the NFP report and also, Market Structure Projection, eTickTools and Accumulation Indexes nailing the low on Friday morning in the 9:30 to 10 AM area and at that time suggesting a close near the high of the day as the most probable outcome.

Given the overall setup, IT MUST BE STATED AGAIN for the record, that impulses usually retest and they require more attention that we had received up till Friday last week. Friday was a solid step in the right direction. Interestingly, HAL and RVS systems began triggering initial SHORT risk entries which ideally get additional entries higher - these systems are very reliable and the fact that they prefer to sell this rally is significant.

Also, in last weeks, post, we specifically mentioned that into the first 3 or 4 trading days of this month bullish potentials are probabilistic. This remains the case, however, starting on Tuesday's AM cash market open, forces turn much weaker with Wednesday being particularly so.

Additionally, IT NEEDS TO BE RESTATED, the markets are in BEAR IMPULSES which implies much further downward pressure to come and does not view this retest as bullish. Nor do RVS and HAL, which contend that the bias in the markets is now statistically a BEAR MARKET. According to very long-term Market Structure Projection overall, downward pressure (ofcourse, with strong rallies interspersed) are probable into March/April next year.

Weekly Impulse Retests

Weekly Impulse Retests

Daily Impulse Retests

Daily Impulse Retests

In closing, We REMIND ONCE AGAIN AS IN OUR LAST POST, that once the shorter-term charts start generating downward impulses, starting from the very short-term 1, 2, 5 and 15 minute charts, risks for downwards progress increases significantly and that type of activity, shorter-term impulse generating fractals across time frames will certainly be in place when we complete upward structures on the intermediate-term to longer-term cycle charts. This can happen, starting at any time. Complacency in this market is not a good option. While the markets can extend upwards, these are fickle upward impulses can truncate abruptly.

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

 

Today’s Short-Term Projections – Squeeze

There was a high probability 3:30 AM timing window today. However, this timing and market structure was not respected so far this AM and additionally the move overnight was too strong for such a structure. Impulses on short-term charts and potential emerging ones one medium term charts suggest move may need some time to metabolize. Yesterday, followed projections nearly exactly - with the low triggering around mid-day as posted in real-time in the lounge and contrasting bearish views expecting breaks to new lows. Presently, it is time for bears to be careful for a few days.

September 25th, 2015 Intraday Market Structure Projections

September 25th, 2015 Intraday Market Structure Projections

DAX – Tick Tools Show the Way in a near 500 Point Drop

Yesterday was a horrid day for DAX. It went up in the morning, when the futures opened and surpassed the 10.000 mark. Actual high was 10.019. And from there it went in a vicious decline to put in a daily low at 9.559. That’s 460 points in just one day!

Now anyone with access to the tools would have been forewarned to pay attention when it counted - at the 10.000 mark. As can be seen, 10.000 was highlighted with a buy X-treme and an X-tick to boot (on v-tick chart). When the market made the high above 10.000, a capitulation bar appeared. Now that’s a dangerous triple combo. And when the market reversed without the moving average getting a chance to get above that buy X, it was a clear sign that market was putting in an important pivot there.

Yet another sign to be cautious on the long side was that the market was still impulsing down on the 15-min and 60-min cycle - from the 10.100 area. And the 60min chart showed a bearish retracement signal at 10.019, which was the high of the day.

Just a regular day in the life of the dax tick tools...

vtick

V-tick chart

60min

60min chart

15min

15 Minute Cycle Chart

“Nightmare on Wall Street”? Projections Suggest Highly Negative Period Dead Ahead

As discussed on these pages for months, the week of the 21st was likely to be a lower high and also likely to open up a pronounced period of weakness. The projection turn-window appears to have been left-translated - meaning occurring early in the timing window rather than middle or later regions of it. There is still a relatively low possibility the market can try to hold up into sometime next week, however, on a short term basis MSP suggests market stabilization or even bounce attempt into early Monday morning but that overall session into the cash close should have higher than normal bias toward weak price action  If such a scenario is the case, it would likely be difficult for the market to recover from, which is why it is most likely that a left translated turn has occurred. When we made suggestions relating to this structure, it was well before the market's initial foray into August 24th lows and knowledge of how strong an expected drop into the area of August 21st would be. We had expected significant weakness into the 21st, but not particularly a crash - but nonetheless the tool-set and resources and guidance at mcm was exemplary and conservative.

As implied by the mcm data (many charts posted on these pages), the drop into August 24th was NOT a bottom or even capitulatory - it was a more likely breakout to the downside. Almost all of our systems have switched to a bear market bias after being bull market biased since 2011 and primarily looking for long during this period. NOW THEY ARE FOCUSED ON SELLING STRENGTH and sold the recent bounce into the MSP reversal timing. What is now suggested via market structure projection is what could become an extended period (3 to 4 weeks) of pronounced weakness into October with high probability that the August 24th lows are breached - most likely significantly. As the European markets are leading this decline we are presenting the MSP picture via the DAX - but the S&P500 picture is very similar. Please note, that a break of the 1820 on the S&P500 cash could open the floodgates if it so wishes and bring into focus targets from the 1680's to 1620's. The area below 1820 has quite limited and thin support and does not see more solid potential until the 1600's somewhere. Either way this is NOT your grandmother's market it's a liquidity trap of epic proportions, so, regardless of projections or any other trading approach, great care is currently warranted.

DAX Daily Daily and Weekly Market Structure Projections

DAX Daily and Weekly Market Structure Projections

Being aware of the pronounced risk potential ahead, we have done several webinars to present methods to effectively and objectively participate in what can become violent maneuvers ahead. In that light we did a seminar on more details regarding impulse trading and handling of violence in the markets. It was a long webinar, but we think pretty effective in communicating and transmitting learning and some techniques that we feel can help overcome emotional stresses and haphazard risk-taking. We invite you to watch the recording of the event at: Click here for the videoThe video is free and we hope you may find it of value. We would like to thank the people who spent time with us this weekend and look forward to scheduling another event at some point in the not distant future.

mcm “Applied Cycle Impulses, Applied eMotional Impulses – Volatile Markets” Proposed Webinar 2

Applied Cycle & eMotional Impulses

eTickTools Additions Detail

eTickTools Impulses Detail

Identifying Impulses Down

Identifying Cycle Impulses Down

Previously we scheduled an initial webinar to discuss the nature of impulses - both eMotional and Cyclic in regards to trading volatile or even crashing markets: Crash Potential and Techniques to Trade one . We wanted to offer a follow-up webinar and discussion. We are happy to have resolved the technical issues with the webinar tool that we wanted to use previously. So, this should be a high quality and highly interactive experience once it is scheduled. We are putting the Webinar scheduling and attendance to a vote.

The webinar will be free and will be an interactive Q&A format when it is scheduled. We are seeking to get a near-term slot assigned that is convenient to as many people as possible. Our goal is to assist in helping users to find techniques to identify, take advantage, manage and prosper from unexpected shocks or dislocations and emotionally charged market environments.

Below is a vote. Please choose the times that work best for you and supply your email address and we will update you on the final scheduling of the webinar. All the times are quoted in Eastern Standard Time (New York). Also, note you can become  a registered user for our site and vote which will make it easier to sign up for the event once it is scheduled. Registering will be free.


[yop_poll id="10"]

 

Intraday Projections: September 11th weakness

Yesterday the markers deviated significantly from structural behavior. Perhaps contract roll for futures contributed to this. We published to this deviation potential live in the "Lounge"early in the morning when the markets should have continued their down movement "This bounce should not be happening here via timing and market structure - we are covering shorts for break even. Lots of small trade shorts are occurring while much larger buys are occurring which suggests retail shorts are likely to get run over" was what was posted around 10:30 AM. This is an example of how knowing what the structure of market can be as valuable when it complies as when it does not. Significant deviation from market structure is an early sign to expect the unexpected. Combined with multi-disciplinary analysis such as the exceptional signals from the mcm-Indexes and the eTickTools, we had actionable early insight into the day's developments.

Today there are no particularly bullish outcomes probable for the day session. However, please remember that the markets are being applied strong drugs and are highly susceptible to erratic unstructured behavior.  Keep in mind, weekly projections suggest a sharp upward push soon so keep an eye peeled for the start of any upward momentum...such a move could end up being pronounced.

Note, today is September 11th. Having lived through the 9/11 event directly and personally please take a moment in tribute to this terrible event.

September 11th, 2015 Intraday Market Structure Projections

September 11th, 2015 Intraday Market Structure Projections

Character of a Composite Day in September

Below is a composite of the net character of all September Biased Market Structure. Each day is netted out to just one imaginary day for each of the databases: 24 QE Era data (Magenta), Inverse Market Structure (Cyan), 20 Year Market Structure (Red) and Bear Market Structure (Gold). What we can see is that if any progress is made in September it generally happens in short bursts of strong days and more than likely very strong overnight sessions. Other than that the general tendency is towards weakness during the day session. Highs like to form int he pre-market between 3:00 AM and 6:00 AM EST and lows like to form in the afternoon in the 1:00 PM to 2:00 PM timing. So, this makes the pulse of the market in September orient around a timing window of 5:00 AM and 1:30 PM with generally only two timing points. This is unusual as it is more usual to have three. However, these structures may be quite useful for trading the rest of the month. We will post additional details for members.

September 2015 COMPOSITE Intraday Market Structure Projections

September 2015 COMPOSITE Intraday Market Structure Projections

Intraday Projections: This is Your Market on Drugs

Yesterday we indicated in "the lounge" that either early AM highs were dominant and likely to lead to closing near the lows. A bounce into the Open would likely lead to opening highs with a reactionary drop into midday area and strength in the afternoon. The anticipated bounce are mid-day was attempted but failed and reverted highest probabilities to the former scenario. Today is again another similar session - however with less upward potential organically. Therefore, be alert for AM highs and potential stabilization attempt into the noon area once again. If noon stabilization or bounce attempt fails then it is likely again that market may be leaning towards a weak afternoon once more.

As a note of reminder, the reason we made such a large effort to educate regarding impulsive cycle and eTickTool Extreme breaks was specifically because the market is on drugs, as it were, and may go on wild trips. Please continue to pay attention to the impulses with a keen eye and feel free to ask any questions regarding identifying them. Yesterday's impulses that nested up were tremendous as were the impulses that nested down and suggested that a downside risk was not insubstantial.

Also, note yesterday had positive buying via large share trades as shown via our cash add and withdrawn index. Once the intervention attempts were overwhelmed by the apparent advance knowledge of Brazil (emerging markets downgrade)and China Yuan devaluation, this index went negative for the first time during the day and risks also turned decidedly adverse for a larger bounce. This index is very important and an easy way to spot successful or failing intervention attempts or for that matter convicted buying or selling by institutions.

We would like to remind that the weekly MSP propensity is, as we see it, currently in a period of large volatility chop/consolidation and requires a break or failure. We feel that the most likely scenario remains a break to the upside somewhere in the vicinity of the week of the 21st which then fails into a 5 to 6-week downward bias. It is easy to get bearish too early while it appears that the market has work to do.

September 10th, 2015 Intraday Market Structure Projections

September 10th, 2015 Intraday Market Structure Projections

Major and minor updates to eTickTools

Lots of Stuff and Projection Update

This weekend we completed a major upgrade of charts and chart streaming for the mcm site. We added significant new enhancements to the eTickTools Project and we rolled out some new analyses - Historical eMotional Extremes.

From a housekeeping standpoint we will bullet-point the list.

  • Fixed Cycle Display and Markers on 5-Minute chart
  • Fixed Scaling issue on 1 and 2-minute charts
  • Addressed the printing of a double "potential stop-run" when triggering at the open for eTickTools
  • Added Percentile Ranking for each buy and sell-extreme for eTickTools - this is a big deal
  • Added a Ranking for the volume extreme taking place during a Buy or Sell extreme for eTickTools
  • Added auto updating Historical Extreme Charts for both the S&P500 and DOW
  • Added an alpha toolset for DAX that is just in testing phase
  • Added various other general clean-ups and labelling for tools and charts

The additions of rankings to all the eTickTools extremes is a significant enhancement and allows an unprecedented and high quality of gauge of the amount of effort the market is exerting at a specific capitulation point. The addition or a ranking of the amount of transaction at the point is also a significant enhancement. We encourage you to ask questions regarding any of the enhancements.

Major and minor updates to eTickTools

Major and minor updates to eTickTools

Regarding the markets, Daily/Weekly market structure projection has suggested that a consolidation after the projected bounce during the 1st week of September occurred. This is indeed appearing to be playing out. Markets are very bearish and people are very scared which could contribute to a pause in down movement and leads to strength into the week of the 21st. It needs to be made clear that these are contextual time ranges. If you have been reading these pages, you now doubt know that week 1 of September has been viewed referred to as potentially important point for the markets and as such could be a significant turn from an up move to down to new lows or in the more likely case, a down move that comes in the form of a period of consolidation for further highs into the week of the 21st. Additionally, note that MSP was correctly projecting weekly weakness into Thursday, August 20th. However, the turn from down to up did not come during Thursday's day session as projected but rather 9:30 AM on Monday - 1.5 sessions away. It seems to us that a projection made several months ago for a down week into Thursday the 20th being met to within 12.5 cash trading hours is about as accurate as one can reasonably expect during a market dislocation and certainly more accurate than most wave extrapolations and technical analysis would usually be able to be with any reliability. This condition resulted in needed in to rely on shorter term tools: eTickTools and Cycle Impulses for example. We did a webinar on these subject (http://mcm-ct.com/blog/webinar-follow-up-and-content/) and plan another because in the coming markets impulsing beyond emotional extremes and through cycle supports is a key tool that can objectively help to remain on the right side of a market even when the desire of a trader are to take the opposite direction - such as buying weakness when in fact an impulsive move downwards may just be beginning.

As such, eTickTools did an exemplary job of pointing out that the markets were likely under a severe capitulation by triggering multiple X-Tick downward selling impulses during that Thursday's session.  We made this post wich is a good reference: Market Consciousnesses – Running Through a Flux Capacitor. Indeed, the markets have been rushing back through time and retracing the gains of the last years. The danger continues to be high, though for the time being abated somewhat.

DAX Market Structure Projections

DAX Market Structure Projections

Below is an updated chart of the Longer-term MSP (Projections) for the S&P500. With the DAX suggesting a shallower pullback, edge is increased that probability of consolidative behavior for S&P500 is increased into strength into [5] on the chart below. This chart is suggesting a period of consolidation/weakness and then a push into the long referred to week of Sept 21st.

S&P500 Market Structure Projections

S&P500 Market Structure Projections