Last week we had fireworks again, with the first 3 days being very bearish, while Thu-Fri provided a vertical V-shape rebound, with up gaps on the cash sessions on both days.
There were quite a lot of great tells from the mcm tools, so let's dive right into the "lessons learned".
- IGSI unconfirmed low set-up
Unconfirmed lows on IGSI are very powerful set-ups and are normally good for a lot of points. A great example is the actual move off the Thursday morning low, which was unconfirmed on IGSI. However we actually had 2 unconfirmed lows set-ups, the first of which failed. Let's see the main differences between the two.
On Tuesday we had an unconfirmed low on IGSI, but the initial bounce off that low triggered bearish EE which held and pushed price lower. The unconfirmed low was held initially, but the bounce off there triggered again a bearish EE which also held. The next trip lower broke decisively the unconfirmed low and the market flushed.
On Thursday we again had an unconfirmed low on IGSI, but this time, buyers never hesitated and rocketed off there.
The main take-away is that the confirmation lvl for the upside set-up of the unconfirmed low on IGSI is the peak of the prior IGSI high before the unconfirmed low. If IGSI shows bearish EE vs that lvl, it is best to be cautious and raise stops on positions entered at the unconfirmed low.
2. FGSI up squeeze set-up
Normally when FGSI is at extreme optimism (red zone) it indicates a top and reversal is close. However the "up squeeze" set up happens when FGSI is in the red zone and starts pulling back, while price keeps hovering near the highs or even makes new highs. That indicates that market participants are increasingly pessimistic, but are unable to move prices lower. Ideally this sort of set up is completed by a breakout on Tick Tools (TT), like a breakout over a buyer exhaustion (BE) or an important level, like the maginot line (ML).
We had also 2 up squeeze set ups on FGSI last week, one failing and one playing out well.
The 1st one occured on Thursday. After the big bounce off the unconfirmed low on both FGSI and IGSI, FGSI reached extreme optimism (red zone). But price continued higher, as FGSI started to come lower from there. On TT we had broken out a BE just after the cash open and everything was looking good for the up squeeze set-up. TT even triggered a Seller exhaustion (SE) above the broken BE, but the big warning came immediately after that when a new BE was triggered. That turned out to mark the high for the day and the market retreated quite strongly from that level.
The 2nd one occured on Friday and this time there was no stopping the buying stampede. We had almost the exact set-up. FGSI moved to the red zone, then started pulling back, while price kept climbing. TT had broken a very strong 100% BE Xtick and held the back-test. Then came a SE above the broken BE Xtick (so far exactly like the set-up from Thursday), but this time no BE triggered and the coast was clear for buyers to continue higher. This is exactly what happened as price grinding higher for almost the entire session, with only the last 1h sesing a few whipsaws both down and up, and closed near the highs of the day.
The main take-aways is - the up squeeze on FGSI is a powerful set-up, but must be completed with signals from TT. If a BE hits that caps price and then a SE gets broken, those are strong signals the buyers are not in control any more. If TT signals that the up trend has little resistance, then the up grind can continue unabated for quite a bit. As can be seen, an additional confirmation on Friday was that price held the danny line all the way until the last 1h whipsaw. That is indicative of a strong up trend.
Lessons learned part 4
/in Charts /by mcm-AlexThe 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.
mcm daily market update 18.Jun.21
/in Charts, Public /by mcm-AlexST trend: down, with potential bounce attempt
Yesterday we were noting that the ST trend was neutral as both sides were inefficient, as shown by FGSI (something which is happening quite often in the o/n as of late). The market had a big pop prior to the open, then a few whipsaws before finally dropping hard to retest Wednesday's lows before rallying hard into the close and retest the highs of the day.
The o/n now saw the market moving sideways and then starting to drift lower. FGSI is showing extreme pessimism already, so a bounce might be attempted, but it it also showing confirmed local lows, so the decline might extend. We have a bullish EE lvl vs yesterday's LOD, so that levels becomes important if we do in fact accelerate lower. The biggest problem for buyers is the fact that they lost ML, then tried to win it back but failed.
mcm daily market update 16.Jun.21
/in Charts, Public /by mcm-AlexST trend: neutral
Yesterday we were noting that the trend was up, but with a potential reversal pattern, as all GSIs were showing unconfirmed highs at the o/n high. That did prove to be a bad omen for buyers and the market proceeded to then retrace the entire rocket launch move from Monday's last 2 hours cash session.
At LOD we did get an unconfirmed low on FGSI and market tried to bounce, but this time the bounce failed to get above ML, which is a clear indication that the buyers are losing control of the ST trend.
In the o/n session we had only a sideways movement with whipsaws in a tight range. FGSI is showing that both buyers and sellers are inefficient, as small price movements trigger big swings in FGSI. One thing that gives the sellers an edge is ML and the fact that it rejected price action yesterday but also in the o/n. ML continues to be the key for the near term trend, so if buyers want to stage a bigger bounce from here they must break above ML. Today is the conculsion of the FED 2 day meeting, so prices might stall and continue to sideways chop from the o/n until after the FED announcement and then stage a larger move.
Lessons learned part 3
/in Chart-Intraday, Commentary, Public, Uncategorized /by mcm-AlexLast week we had fireworks again, with the first 3 days being very bearish, while Thu-Fri provided a vertical V-shape rebound, with up gaps on the cash sessions on both days.
There were quite a lot of great tells from the mcm tools, so let's dive right into the "lessons learned".
Unconfirmed lows on IGSI are very powerful set-ups and are normally good for a lot of points. A great example is the actual move off the Thursday morning low, which was unconfirmed on IGSI. However we actually had 2 unconfirmed lows set-ups, the first of which failed. Let's see the main differences between the two.
On Tuesday we had an unconfirmed low on IGSI, but the initial bounce off that low triggered bearish EE which held and pushed price lower. The unconfirmed low was held initially, but the bounce off there triggered again a bearish EE which also held. The next trip lower broke decisively the unconfirmed low and the market flushed.
On Thursday we again had an unconfirmed low on IGSI, but this time, buyers never hesitated and rocketed off there.
The main take-away is that the confirmation lvl for the upside set-up of the unconfirmed low on IGSI is the peak of the prior IGSI high before the unconfirmed low. If IGSI shows bearish EE vs that lvl, it is best to be cautious and raise stops on positions entered at the unconfirmed low.
2. FGSI up squeeze set-up
Normally when FGSI is at extreme optimism (red zone) it indicates a top and reversal is close. However the "up squeeze" set up happens when FGSI is in the red zone and starts pulling back, while price keeps hovering near the highs or even makes new highs. That indicates that market participants are increasingly pessimistic, but are unable to move prices lower. Ideally this sort of set up is completed by a breakout on Tick Tools (TT), like a breakout over a buyer exhaustion (BE) or an important level, like the maginot line (ML).
We had also 2 up squeeze set ups on FGSI last week, one failing and one playing out well.
The 1st one occured on Thursday. After the big bounce off the unconfirmed low on both FGSI and IGSI, FGSI reached extreme optimism (red zone). But price continued higher, as FGSI started to come lower from there. On TT we had broken out a BE just after the cash open and everything was looking good for the up squeeze set-up. TT even triggered a Seller exhaustion (SE) above the broken BE, but the big warning came immediately after that when a new BE was triggered. That turned out to mark the high for the day and the market retreated quite strongly from that level.
The 2nd one occured on Friday and this time there was no stopping the buying stampede. We had almost the exact set-up. FGSI moved to the red zone, then started pulling back, while price kept climbing. TT had broken a very strong 100% BE Xtick and held the back-test. Then came a SE above the broken BE Xtick (so far exactly like the set-up from Thursday), but this time no BE triggered and the coast was clear for buyers to continue higher. This is exactly what happened as price grinding higher for almost the entire session, with only the last 1h sesing a few whipsaws both down and up, and closed near the highs of the day.
The main take-aways is - the up squeeze on FGSI is a powerful set-up, but must be completed with signals from TT. If a BE hits that caps price and then a SE gets broken, those are strong signals the buyers are not in control any more. If TT signals that the up trend has little resistance, then the up grind can continue unabated for quite a bit. As can be seen, an additional confirmation on Friday was that price held the danny line all the way until the last 1h whipsaw. That is indicative of a strong up trend.
mcm daily market update 24.Mar.21
/in Charts /by mcm-AlexST trend: neutral
Yesterday we were noting that the ST trend was down, as buyers were showing large inefficiency on bounces and FGSI never touched the extreme pessimism (green) zone. That happened close to 6am and FGSI then had an unconfirmed low, which pointed to a potential ST bottom. From there the market ran back towards 3940, with FGSI getting close to extreme optimism, before failing and breaking down to new lows.
The o/n continued to be worrying for buyers, as the price action was more sideways, but FGSI had big spikes to the upside showing they are still very inefficient. However on the last dip, sellers were also inefficient and actually triggered a bullish EE vs the prior low, which held. That puts things in the neutral zone, as both sides are inefficient and trigger bullish and bearish EE on bounces/declines. Once one of those EEs gets broken, that will be a sign that one side is taking the lead.
ML is also a big line in the sand and if price holds above or below will also be important to see. Currently the buyers are attempting a breakout over ML, will be improtant to see if they can hold above.
mcm daily market update 15.Mar.21
/in /by mcm-AlexST trend: up (with potential pullback risk)
On Friday we were noting that the trend was down with a potential bottoming attempt and indeed the market found its footing in the morning and then grinded up throughout the day. It continued higher on Sunday, but then retreated after touching the area close to the ATH.
This morning, price touched again the Maginot Line (ML) on the pullback and we had an unconfirmed low on FGSI, from where the market bounced hard and is now close to the ATHs again. That makes the ST trend up, however FGSI is at extreme optimism, so its behavior needs to be monitored to see if we get further up squeeze or a pullback to allow it to "cool off".
Lessons Learned part 2
/in /by mcm-AlexLast week we had one of my favorite low risk set-ups, namely the Maginot Line (ML) "return to mean" trade. Actually it is a return to ML trade, but it works like a return to mean. This set-up basically states that whenever price gets too far (meaning more than 30-40 points) from ML, either on the upside or the downside, it is likely that it will go back to touch ML in the near future (1-2 trading days, but usually it's in the very next one). Because of the 1 and 2.5min cycles, this set-up can be entered into very close to the actual peak and can be turned into a stress-free trade very quickly. Also worth mentioning is that more often than not, ML will overshoot in the other side once price comes to it, so some runners can be left for that instance.
But let's see the real example from last week, which was text-book.
First off, Tick Tools (TT). As can be seen on the chart, we had a breakout above a buyer exhaustion right off the cash session open and after that bulls were fully in control until they reached the 3945-3950 area. Up there, they were already close to 40 points above ML (which is trending up when price is moving up, so that's something to consider when putting profit targets). The turn was anticipated by the "rounded top" pattern, which is price action stopping after a steep ramp and unable to breakout of a certain level, despite several tries. But it was the break of the 1st seller exhaustion (SE) and then this lvl turning into resistance that was the clear signal that buyers were losing control.
1 and 2.5min cycles were amazing at pin-pointing the turn and giving several entry possibilities, as they were unwinding the up impulses. 1min being the fastest, unwinds first and had a total of 4 END resistances painting, while 2.5min only had 2. Additionally, both had their cycle strength tool (white line at bottom of the chart) turn lower from max value. That is a great tool at pointing the turn after a huge run (both up or down) and you can see it went down pretty early once the up move lost momentum, giving plenty of warning and preparation time for setting up the short entries. A 3rd clue about the turn was the cycle oscillator tool (green line between the price chart and the cycle strength tool) which had a big divergence at the nominal high. It peaked at very high value (where the line actually became blue/cyan), and then come back down, even if price made new highs after that. The cycle oscillator tool never confirmed those highs.
When this type of set up presents itself, the best way to play it is to start shorting the END resistances on 1min (if more aggressive) or on 2.5min (if more conservative), AFTER the cycle strength tool moves down. As can be seen, 1min provided 3 entries (had 4 ENDs unwinds, but the 1st one was before the cycle strength tool moved), while 2.5min provided 2 entries.
FGSI and IGSI completed the picture, showing this short was a low risk trade. Both were at extreme optimism (red zone) and FGSI was putting in strongly unconfirmed highs. Because of this, the likelyhood that the market could have continued higher directly, without a pullback was low odds.
So in conclusion, 1 and 2.5min show that the trend is waning when their cycle strength tool goes lower. Starting to look for short entried on the unwinds of the up impulse (END resistances) on both, is a good strategy. Considering FGSI and IGSI in the red, the odds were high that a pullback was needed before market could continue higher. The profit target can be put close to ML (5 points above ML for example for a portion of it, ML for the majority and a few runners left for ML overshoot).
What happened next we all know, of course. Price came down to ML and even overshot it by about 10 points. Text-book playout for a nice low risk entry.
mcm daily market update 12.Mar.21
/in /by mcm-AlexST trend: down (with potential bottom attempt)
Yesterday we were noting that the trend was up as sellers were very inefficient on bounces. That played out nicely until SPX cash hit new ATHs. After that we noted live in the chat room that a low risk set-up for a short was arising. Price was significantly above the ML and 1 and 2.5min cycles were unwinding their up impulses. Whenever that happens and price gets too distant from ML, a sort of "return to mean" is likely in the next 1-2 sessions and price tends to return to "kiss" ML again.
The short set-up played out picture-perfect and price didn't only come back to touch ML, but overshot it on the downside. FGSI was giving signs that sellers were gaining efficiency, while buyers were inefficient on the bounces. This is a dangerous situation for longs, because losing ML is a sign the trend is now down. We do have bullish EE going further back, but sellers are close to breaking the first level. If that happens, then this could retrace deeper.
Lessons Learned Part1
/in Charts /by mcm-AlexThis will be the 1st article of the "Lessons Learned" series. The aim is to discuss the most important set-ups on the mcm tools from the previous week and how they should be approached when they show up again.
First up is Tick Tools, which was amazing on Friday. It nailed the top off the cash open with a big Buyer Exhaustion (BE) Xtick from which the market sold off strongly. And also the low with a strong Seller Exhaustion (SE) Xtick that was overshot and then won back. If shorting the opening BE Xtick was a classic (and easy) play, playing the bounce once such a strong down trend is established (4 SEs broken, one being an Xtick) can be more stressful, however it doesn't need to be. The 1st thing to watch for, when looking for an attempted bottom, is price to break above momentum line (momo) and then for it to change colour to green. The 2nd thing is for the last broken SE level to be won back. Then the attention should be directed to the other important lines - danny, 400bar MA and finally ML.
Friday provides a great example of this set-up, as we had all confirmations one after the other.
As can be seen in the chart, the exact low was on a seller capitulation bar (the 3rd one in the same area). After that, price broke above momo and it turned green. After a few whipsaws just below the SE Xtick level and danny, price broke above both and the next big tell that an important low was in the making was price back-testing danny, which held as support AND turned green. Then followed the breakout above the 400bar MA and ML and then ML was back-tested, it held as support, and then ML turned green. All those signs were just one confirmation after another that the odds were shifting in favor of the buyers. The most bullish scenario played out once the reaction off the 70% BE was held by ML as support, which triggered a breakout. The big 94% BE Xtick might have marked the top, but getting a SE immediately after that at such a high level was a clear sign sellers were caught wrong-footed and were gonna get squeezed as long as the SE lvl held (which it did).
Next up is FGSI. The obvious signals were - extreme optimism (red zone) off the high from the cash open (which added weight to the BE Xtick signal from TT) and extreme pessimism (green zone) at LOD (which was also a sign to look for an attempted bottom). However, it's important to also discuss what happened next. It got to the red zone again pretty quickly on the run up from LOD and then started to move down to sideways, even if price kept moving higher. That is a set-up which indicates a very likely squeeze up, as market participants try to sell (increase in pesimmism), but are totally unable to move price and are getting run over.
mcm daily market update 5.Mar.21
/in Charts, Public /by mcm-AlexST trend: neutral (with bearish risk)
It seems the market stopped tipping its hand in the o/n session and keeps things in suspense until the cash market open. For several days we were noting that the trend was neutral as both sides were showing inefficiency via FGSI in the o/n session. Yesterday the buyers staged an attack over ML to get us back to an uptrend, but failed just above as the markets were disappointed by Powel's remarks. Funny how that works. So just to mention this again: ML is a KEY level for the overall trend. If price is above, we have a bullish bias, while if price is below - bearish.
In the o/n, both buyers and sellers were inefficient, as the market still tries to digest the mini-crash off Powel's statements. We have bearish EE above which held price action and pushed it lower and now bullish EE set up with FGSI bouncing from extreme pessimism. Those levels remain important and a breach would mean one side is getting the upper hand. Buyers want to hold the bullish EE and ideally to break back above ML. That would help them and could trigger a "relief rally". Sellers want to make a stand at (or below) ML and try to attack yesterday's LOD. Breaking the bullish EE level would help them significantly.