Below are the current MS (market structure) projections as of today. Daily and Weekly are below. These shows turn pressure from upward to downward on the Weekly (Magenta line) and very nice tracking up till today for the daily (thick white line). Tuesday to Wednesday AM projected moderately up biased from yesterday morning - looks like it could be a challenge. Nonetheless, we have learned not to ignore their potential because they have been prescient. For a many reasons, today's reaction out of yesterday's low could be a relatively sizable move.
Below is more granular view of the shorter term options for market structure. There is sizeable potential for a morning high and afternoon weakness, however the most probable market structure appears to be inverted QE showing in cyan. If strength continues into the 8:00 am area then its probable that we get a consolidation retrace with probability for something like a 1:00 pm high.
Keep in mind THIS IS NOT TRADING ADVICE - these tools are a representation of algorithmic analysis of past market facts and metrics distilled into structure and then referenced against today.
Below is the e-Tick-Tools chart for today. (These charts are updated on a daily basis in the Historical Analysis Charts section of our site.)
Quite a day overall and exceptional day for e-Tick-Tools. Emotional analysis of the market is sometimes so prescient that its accuracy surprises even when one comes to expect it. Today was such a day. The daily projection called for an up day from Monday AM to Tuesday AM. Monday is statistically one of the most bullish at this time and all it could yield was 8 points on ES. So, we can count another notch in the belt for the daily market structure projections. Interestingly, tomorrow is projected slightly up or consolidation with an up bias from this morning's lows. I must say, I will not be surprised with the market gaining traction here and getting an up morning thus fulfilling the daily market structure.
However, without commenting on specifics in the markets this is a time that anything can happen. The charts presented on the weekend demonstrate that there is precious little capital to hold the markets up if something goes wrong. Most investors are not doing well and have not for a long time and do not have much in reserve. To do well in the market you need to operate overnight or buy and hold and operate without a concern in the world that something can go wrong...because as they say - this time IS different.
Below is today's overview of e-Tick-Tools analysis. Also, note a basic view of Gap Tools is also displayed. Gap Tools posts Gap probabilities after the first 60 seconds of the market open...so gap info was generated at 9:31 am. Since the site is new we wanted to spend extra effort to post educational content regarding some of our work. Hence the fairly significant number of posts over the last days. The objective of the blog is not to post with such high frequency. However, markets are at an interesting point. In addition, we wanted to meeting the public with some extra effort applied to sharing things we think are important. We hope for a long and fruitful relationship with our clients and readers.
This is what e-Tick Tools saw today at the open. A bearish stop run RAID of longs warned with text on the screen. A Broken confirmed selling capitulation - which usually means bulls lose. An X-Tick at the time window low and Gap indications in the first minute showing that gap was likely to extend...and fill was not likely...
We know of no other charts that can show the same kind of analysis in real time
[dropcap]A[/dropcap]s posted on Friday, Daily market structure implied a projection for downward bias into early this week. Indeed, this has played out nearly exactly. Market structure projections, by the looks of things, would seem to be coming off an unprecedented run of correctly anticipating daily directionality. However, this is not the case from our perspective, as this is consistent with the level of tracking and probability coherence that we general experience.
Also, keep in mind that, though the Green 9 and 10 notations on the chart below might seem to indicate potential prices, in fact, they are only demonstrating directional bias, there is virtually no viable information to assimilate for the scale of any up move. In our case, we use other tools for that assessment or traditional technical analysis/symmetry can be helpful.
[dropcap]T[/dropcap]his article goes into detail regarding some diagnostics of the market that are not easily or often seen and most importantly are most often inaccurate as publicly they are presented. We go into some considerable detail to see what is happening under the hood of the market. The surprising discovery is that most investors are most likely not doing very well.
MCM DAY INDEX & MCM CLOSE INDEX
For the day trader - the day session performance has been under-performing for a very long time over all. However, if one were trading the opening and/or the close session - for the last 6 months performance has been especially challenging. Despite all the headlines regarding new highs in the markets every other day:
The most surprising discovery is that most investors are most likely not doing very well. For the day trader, market day session performance has been under-performing market direction substantially for a very long time. However, if one were trading the opening and/or the close session, for the last 6 months performance has been especially challenging.
To summarize, despite all the headlines regarding new highs in the markets every other day:
- For the closing session long traders, the market is an absolute disaster and likely would lead to egregious losses taking account balances back very near 2009 levels.
- For opening session long traders, the market is not quite a horrible with account balances presently approaching Oct 2008 levels.
MCM GAP INDEX
There is one area of performance that has been remarkably good.
Much better than at any point in history that we have examined.
From what it seems - quite probably "too good".
Evidence of central bank cooperation and intervention abound. We have discovered quite a few Central Bank driven "market structures" that have been very strong. Interestingly, it appears that central bank money printing and money amplification efforts via asset interventions and appreciation have been in place for a very, very long time. These market structures go back in history to the 70's and 80's. What seems clear, market crashes notwithstanding, is that central banks are operating and have been operating to increase and amplify the quantity of money via asset markets for a significant duration. Regardless, however, the levels central bank participation of the last years have been unprecedented. , there we have it, the best performance in the markets has been in the areas where the central banks get the most "bang for the buck". The thinly traded and easily influenced overnight session.
Result: The best and pretty much only performance in the markets since 2009 has been in the areas where the central banks get the most "bang for the buck". The thinly traded and easily influenced overnight session.
Currently, from a cursory appearance, there seems to be somewhat of a panic going on. hThe GAP INDEX is now dramatically outperforming prices...while at the same time market are dramatically underperforming during the high liquidity sessions. The question that comes to mind is:
"What happens if the overnight session levitation and performance starts to fail?"
This question can be answered in context: If it were not for the overnight session performance over the last nine months, the markets would be in an all out bear market and most probably crash.
SMART MONEY INDEX
The SMART MONEY INDEX is often touted and bandied about on the internet and TV. However, rarely can a more unviable and distorted index - being highly aberrantly calculated and on its face flawed - be so mispresented.
For this reason, we calculate a reasonable, viable and thorough version of the concept that uses sophisticated synthetics for the dramatic consequences of the ultra slow open of the S&P500 and highly distorted opening prices. As with our GAP index, we use a combination of futures and other ETF 's to synthesize the cash opening prices. This leads to a very high accuracy using our methods of calculation as opposed to the what we normally see published. For the record, it is our opinion that is usually best to ignore any general reference to the SMART MONEY INDEX. Though the SMART MONEY INDEX concept sounds nice - sexy even, as it is calculated it is statistically distorted to the point of being useless.
Using a reliable methodology, however, valuable data can be gleaned from the SMART MONEY INDEX concept. We call our version that the MCM SMART MONEY INDEX. What this tool shows in the included chart in the article via the green line - is a collapse in the "SMART MONEY" investor commitment.
Keep in mind that with overnight Central Bank activity at record highs, the impact of a dramatic fall off in institutional participation may have different impacts than expected. However, it seems that the case for a sudden collapse in the markets due to the absence of professional money may be increasing.
[dropcap]D[/dropcap]aily projection continued their unparalleled run of prescient and accurate daily directional projections. The levels of accuracy have been surprising even though we do expect good results. The reality is that it seems that the added elements to our datasets increased accuracy more than expected. Next week looks like there could be some volatility coming in when the market officially reopen.
It was an interesting day intraday the Bear Market Structure did end up tracking. This was mentioned in the morning post. Certainly, however, and most important the time windows were useful and accurate as markets turned at these windows +/-. However, intraday was not clean for projections due to the gap - However, it must be said that Gap Tools and e-Tick Tools were very accurate. If there is time, e-Tick-Tools for today may be discussed in a weekend post. Today was interesting in that we had 90+% percentile selling and buying extremes during the day that market significant levels in the markets.
Today, 1 minute into the open, Gap Tools analysed the Gap and returned these probabilities for Gap Tools and Tick Tools Members. These probabilities are explained on the chart in detail and also support overall market structure.
[dropcap]E[/dropcap]arly 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.
[dropcap]A[/dropcap] few options today...market structure favors a bounce from 7:30 am time window into open as shown in the scenarios below. How we react to the expected bounce or how the bottom forms will bias the probability skew...bullish scenario odds are improving...though odds are favoring down into Monday.
If markets can hold the 7:00 am area test and bounce into the 9:00 am open that significantly increases odds of upside follow through. Odds for this scenario are improving currently. However, there are high probabilities of weakness after the open. In that case, weakness will most likely proceed into the 12:00 pm or 1:00 pm area and consolidate. A key area to watch for clues - bounce out of 7:00 am into 9:00 am and immediate directional movement at the opening. Not terribly clear today - daily projections are indicating a probability weakness into Monday's open - this could occur on Sunday or start today...so, keeping a close eye on the open here.
Comparison of intraday projections from yesterday's posts compared to today's reality...
Yesterday we posted an update to projections putting into perspective the options for the after hours drop. All the time-windows discussed did identify the key areas for inflection points in the S&P 500 market. And though the option of a 8 am high was quickly virtually eliminated at around 6:00 am to 7:00 am - it was simple to setup the bimodal steps to the best alternate structure - which was for a fairly strong rally into 1:00 pm time windows and a decent pullback attempt with the possibility of closing highs or sideways action into the close.
Below is the for the daily and weekly market structure which has been highly accurate.
The way market structure works is that we get to know in advance the most probable key timing areas and then watch how the market reacts at those timing areas. Last nights 7:00 pm low held and market ground higher but has not tracked that projection super closely. Implications were to look for 7:00 to 8:00 am highs for a downside biased Thrusday to occur. Market seems to have increasing probability that the QE projection (Magenta Line in the chart below). The 5:00 to 6:00 am time window reversed as projected in yesterday's post and is key. Make or break now is 7:00 to 8;00 am.
- If market follows QE projection (magenta line) up then its likely we get follow through during the day to the upside into around 1:00 pm
- If 7:00 to 8:00 am reverses then a weak Thursday day session is likely most probably outcome
This morning well before the open, intraday market structure was posted with key time windows as derived from our projection databases and algorithms. As it turned out, timing and direction for the day tracked very closely and led to anticipated selling into the close.
The markets are reflecting the shifts going on the in the weekly structures which is, as posted Monday, at a considerable inflection point. After hours some bearish activity unlike predominant after hours activity took place. However, it fits well with two possible scenarios:
- Market low in place at 7:00 pm biases higher into 7:00 am to 8:00 am followed by weakness for the majority of the day session
- Market drops into 5 or 6:00 am and then reverses in a decent upward bias for the majority of the session.
As a color to this - it is important to note that this May's projection for performance by Day of the Week tends to be: strongest on Mondays and weakest on Thursdays most of the month. So, a weak day session would not be surprising at all.
Daily Directionality Projections were prescient so far today. Also, comments regarding the intra-day have proven out with a significant SPX low for the day at 11:52 am - right in the middle of the 11:30 am to 12:00 pm time window. We are now approaching timing for around 2:30 to 3:00 pm highs.
Also, note that the accumulation indexes performed strongly all day.
Daily Market Structure Projections see the market retaining upside bias into tomorrow morning...possibly topping out premarket in the time window of around 7:00 am. as we can see the inverted (CYAN) market structure presented as most probable had indeed tracked.
[dropcap]P[/dropcap]erspective is sometimes quite useful. As a last post in this series discussion the Daily and Weekly market structure projection toolkit, we thought a look at the historical projection compared to actuals and combined with a longer-term forward view might be enlightening in some way for context and an overview of this unique work.
Please keep in mind what this tool is NOT:
- not attempting to project market scale or symmetry.
- not attempting to project a trend.
- not a neural networks guessing system
- not based on anything indicators/lagging calculations - only detailed historical trade data and geometrics
However, the objective IS to project structural Directional Change over the analysis period on a week by week, day by day basis. Any view to stringing a bunch of projection elements together is distorting their value. A new high projection is not meaningful. Neither is a new Low projection. However, the fact that the market structure is pointing upwards or downwards for the analysis periodicity is the objective and of value.
[dropcap]M[/dropcap]arket Structure is very powerful this post updates yesterday's post and also will go into a greater detailed discussion about what market structure is and how our approach can be used.
Below is detailed chart examining yesterday's live intraday market structure analysis. The objective is to not only present today's market structure projections - but also to extract useful information from these projections even when the markets are in a conflicted state
[dropcap]T[/dropcap]hough it looked a little iffy this morning with the inverted market structure low triggering around 10:30 am - right in the middle of the time window, and subsequent bounce reaction. The daily projection have indeed tracked out and imply another day of downward bias tomorrow. You can see that the markers at the end of the lines and how they correlated with the protections.
Keep in mind that these calculations are based on daily movements from 9:00 am to 9:00 am NOT the cash close to cash close.
Some very large shifts are going on in the larger time-frame market structure as market sets up for a significant turn...certainly, save for a short bounce in the very end of May and early June, implications are for a weak period ahead.
Up market, Bull market or Bear. There are certain market structures that stand the of time. One of them is the 3AM period. You will see in many future posts on these pages that the theme of overnight liquidity and price movement reflects consistently. Overnight is an especially good time for the market to travel. It is inexpensive, and it creates situations in which investors are forced to miss the bus - as the bus is travelling empty.
Whether in bull or bear markets there is a predisposition for a scarcity of liquidity to lead to rising prices. The thinnest liquidity tends to occur from the 6pm EST open for the US CME markets until 2:30 am EST. As the non-US markets open and especially the non-US central bank trading desks open - liquidity schedules are closely followed.
The chart below is extremely large and we recommend downloading it. There will me more posts and data to share the content in this chart - but this is simply an introduction that we invite you to take a look. Notice that around 2/3rds of the sessions trade down significantly from the 3:00 AM market structure. Also, note that many of the reactions to this structure are sideways and only a minority are up strongly. One of the biggest traps that occur in the large US markets is to open them low, giving market participants very little time and room to manoeuvre. During the live session, reactions tend to be fast after stopping and trapping participants trying selling weak prices and/or subsequently mistime trading the reaction.
if the image, being that it is so large, fails to load you can used this link for the large image.
Earlier today, the inverted market structure was not tracking but as evidenced on this chart below, has now begun tracking and the overnight action may be in the end a form of running consolidation rather than pullback. If markets aim for and make a 10:30 to 11:30 am low then odds will dramatically increase for a strong close.
Some other anecdotal structure would indicate May highs preferring to occur between the 15th to 19th as shown in the projection chart. Weekly highs often occur today for this period as well. Therefore, if market makes a high today that would align with daily pressures as well.
Till this occurs, the probabilities still favor the 20-year dataset (RED) market structure projection which would suggest a bounce into the 11 am area....selling into 11 am is a sign the more bullish day session reaction may be occuring.
As a test of some new post functionality and a public service, we are re-posting the market structure charts in this post for easy viewing...please refer to the previous posts for details
[dropcap]Below[/dropcap] is an example of intraday market structure projection for today. Key timing at 4 am and 10:00 am to 11:00 am for a potential day high. Only the inverted QE market structure suggests the possibility for a stronger close. This market structure is not playing in the key overnight session and, therefore, is relegated to not high probability at this moment. So far, 20 year and QE market structure are tracking best and score the highest probability at this point. Time windows are very similar for both - pulling back after a 4:00 am high and then rebounding into the open.
As this market continues to wind higher in this Federal Reserve and central bank inspired inflation - it continues to follow the market structure/timing that their large footprints leave behind.
[dropcap]R[/dropcap]egarding the previous post showing the current market structure projections, this is the first time that we have posted these charts on the new mcm site. Given that, there may be some unfamiliarity with these tools. This does not, of course, exist within the current community - which is very familiar with them over quite a long period. We thought that it would be of value to show a chart of the past projections and how our market structure algorithms tracked.
For this reason, below is an actual chart reflecting from April 1 that users referenced in real-time. None of the data on he projection lines changed from the future projection to the time they became historical - meaning as the future became the present. Keep in mind that though these methods have tracked well for a long time there is no necessity that they will continue to do so now. There is no reason for them to change their drift substantially, as we have found that markets are highly predictable and repeatable though the sizes of movements, distentions and reactions may not be.
[dropcap]M[/dropcap]arket structure is the driving force behind the ebbs and flows of capital. The chart below shows market structure projecting into the future based on a 20-year intraday data set and analysis of timing and structure. While this tool is not always correct, its assumptions are directly derived from the markets and are not correlated in any way to any other analysis. Due to this, projections for the S&P500 (and other markets as well) can be probabilistically derived can be calculated into the future. They also do not change significantly from the initial calculation due to the design of the algorithm.
This chart below shows from May 4th to present and then forward into July. All the market structure projections on this chart have not changed and just happen to correlate the majority of the time with the day to day directional movement in the S&P500. This tool does not endeavor to estimate the scale of price changes. Other tools are available for that. However, it does seek to ascertain the bias from AM to AM (not Close To Close) for the markets. The thick white line moving up means a projection of up from AM to the next AM regardless of how much. The reverse is for down.
Also, note that Monday's have projected to be the strongest days of the week recently, and Fridays are next strongest. Tuesday, Wednesday, and Thursday have projected more negatively biased with Thursday being the weakest. None of this dispells the potential for the market to make a further push prior to weakness. However, this data probabilities are getting a bit long in tooth this week.
For reference, below are the Daily and Weekly market structure projections from April 1.
The indexes below show a potential bear trap setting up:
Bears could be in trouble:
- you can see on this chart people are expending a large amount of effort via the accumulation index
- very high amount of downside trade ticket ratio but there are no dollars being transacted
- There are no dollars being transacted on the "dollars added" graph
this means all very small trades designed to make the make internals look much worse than they are
- 1200% more downside trade tickets than upside yet price at highs