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Happy Holidays & Market Projection Update

We wish you a Merry Christmas and happy holidays and a successful 2016 to come. 2015 has been an interesting year for MCM and we will do a review of our successes and failures things with improved, and weaknesses and strengths. Overall, as can be seen from the chart below market structure projection has been one of the strengths, and it has successfully projected the market out for many months now. These projections have not changed as they are rendered in the charts and remain relevant to market behavior. Weakness projected into [5] bounced as expected and began the latter part of a Santa Claus rally. The strength of the drop that occurred last week did not fit into the resolution of the weekly projections. However, if you do look at the daily projections which are the white lines at the bottom the chart you can see the morning to morning weakness that showed up during those days. Again, these renderings have not changed and remain relevant. This coming week as a potential to be a pronounced decline. For the January effect for this year, the average closing gain for the year is -9% or so. While we may not reach -9% next week has the potential to take us significantly towards this direction and caution would be advisable. This is certainly NOT an options being presently seen in popularity on the internet as most Elliott wave and technical analysts are distracted with triangles which in this analyst's option are way too obvious and accepted to follow expectations easily.

S&P500 Daily and Weekly Market Structure Projections

S&P500 Daily and Weekly Market Structure Projections

Again, we wish you a very merry and safe Christmas and look forward to seeing you in the new year. Please come back to see our year-end review mentioned earlier in this post which will be posted soon.

MCM Newsletter – Outlook for Week 21-25 Nov

Executive Summary:
Main Trend (weekly): neutral
Intermediate Trend (daily): neutral
Short-Term Trend (60min&135min): down 

Details:
Nothing significant to report on the weekly cycles. They are currently oscillating and are starting to move lower from resistances (at 2110.5 ES and 17907 YM). The normal expectation is still that market will head lower until a new support level is triggered. Interesting is that also the directionality tool started to turn and head lower.

weekly_20.12.

Weekly Cycles

On the daily cycles, YM actually reversed its upward impulse by having resistance  trigger below the break-out level. ES had a BR and an END, which means it could have finished unwinding its impulse up. Last week it triggered a support level at 1983 which led to a strong bounce (helped by the FED day), but then the market came back down and is now close to the support level again. Considering that both ES and YM are close to their recent support, the behavior here is critical for the intermediate term direction. A bounce is the normal expectation, but if the market cannot sustain that bounce and we break below that could start another impulse down which could take the market to much lower levels.

daily_20.12.

Daily Cycles

The 60 and 135min cycles had an interesting week. Both started impulses up (point 1 on the chart), but couldn’t sustain the upward movement. 60min had a BR support trigger at 2037, which was broken below and thus reversed the impulse up by starting an impulse down (point 2 on the chart). 135min simply reversed its upward impulse and had support trigger only below as a 2nd END of its down impulse. However that support was also broken (point 3 on the chart). The new nested impulse down on 135 is not confirmed yet, since MA did not cross-over. But if the market doesn’t bounce, more or less immediately, it will. Breaking into (new) down impulses on both timeframes, at a time in which also the daily could start the same, would be very bearish. It remains to be seen if a bounce is coming on Monday or we move lower directly.

60&135_20.12.

60 & 135 min Cycles

Projections for Bounce Sometime Next Week in DAX

The DAX market has tracked MSP well and is looking for an interim balance into Christmas starting sometime next week. As has been posted throughout these pages by breaking below extremely strong capitulatory emotional selling extremes (X-Ticks) via eTickTools on a pervasive basis the markets triggered behavior unlike any that we have seen since before the August crash - putting it at potentially grave risk. IF NO BOUNCE OCCURS NEXT WEEK THEN THE IMPLICATIONS ARE DIRE. This has serious implications for the US markets as well as the DAX tends to lead the US equity markets and S&P500. It is, therefore, with the most concern and hope that we look for the markets to reward the low liquidity seasonality into Christmas with a win. However, the negatives are also pervasive in that NO analyst we see is really looking at anything other than upward triangles, falling wedges and wave 4's. We do not believe the equity market as a whole will be seeing new highs anytime soon - contrary to the very bullish general expectations it seems in the analyst space.

DAX Market Structrue Projection

DAX Market Structure Projection

Treasury Projections – Tracked Almost Perfectly – Appears Things Are About to Get Ugly

Recently posted microstructure projections treasuries, which were right translated two and a half days. The direction and timing of tracked in stellar fashion and we are still looking at a decline in treasuries into mid-December. Key turn dates to watch come in around the 15th. One of the most interesting things that appears to be happening is is that the direction of treasuries and equities are syncing. People in general are not used to this relationship and expect that treasuries trade upwards when stocks trade downwards. It appears that the synced and correlated behavior between equities and treasuries may continue into next year as both suggest weakness into February. It is possible that as equities start to accelerate into the completion of a down move that is possible into February and March - that treasuries suddenly decorrelate and start trading inverse to stocks once again. This is an interesting trap and it is also something that we have seen repeatedly with these central banker distorted and manipulated markets. Disparate markets all of a sudden start trading due to liquidity or manipulation or imbalance in the same direction and then when liquidity stresses change start trading in the opposite directions. This is happened countless times with different currencies vs. different commodities in different equity risks just as investors get used to the relationship the relationship changes. This is something to watch for in the behavior of treasuries, which appear to be linked at this time and for the foreseeable future with the prices of equities.

US Bonds Market Structure {Projection

US Bonds Market Structure Projections 

Update on Bonds Turn Window

In response to a question about updated MSP on bonds, below is an MSP chart which represents the bond behavior is on target, and tracking. Probabilities would favor a turn near-term and it is important to watch the white daily line for daily direction opinion. With this line a series of days of weakness may show up as a drop but the goal of this is the only project the oscillation for each day from previous morning to the next morning - therefore we can see that there was upside bias into this morning which should lead to downward bias to tomorrow morning. Either way, it appears we are in an important area for bonds.

US Bonds Market Structure {Projection

US Bonds Market Structure {Projection

Updated Projections and Detail Regarding MSP

In this article, we publish updates to the various MSP charts presented on these pages recently. As mentioned previously, there was a bug fix which corrected the significant misplacement of certain MSP points under certain conditions. The comparison and analysis demonstrating this problem is shown below at the bottom of this article. The result of this discrepancy is that the incorrect MSP did not track, but the correct MSP tract as well as one could possibly want. With that, the corrected MSP is showing an inflection point of this week for the S&P 500. Not only that it is showing inflection points potentially building up for the DAX and the bond market. The bond market rally seems to have been a very foreign concept. However, market structure projection got it right so far. Keep in mind, that the most sophisticated work we have done related to the equity indexes and market structure projection is being expanded to many other products - this is a process.

One of the interesting things is that copper and gold, which had a high pressure for a turn in November have not tracked and diverged significantly from their projected behavior. This indicates that something else may be going on, and caution is warranted. In either case, the high probability area for gold to launch a sustained rally appears likely in January.

S&P500 Market Structure Projection

S&P500 Market Structure Projection

US Bonds Market structure Projection

US Bonds Market structure Projection

DAX Market Structure Projection

DAX Market Structure Projection

Detailed comparison of Incorrect MSP versus corrected bug fix

Detailed comparison of incorrect MSP versus corrected bug fix

Inflection Point Approaching

We will be posting a detailed article with updates to market structure projection which is suggesting and early month inflection point in December. However, plus or minus two or three trading days would not be surprising. Therefore, while it should be expected that we get a bounce as the new month kicks in, this bounce could be to a high. In either case, market structure projection is suggesting a potentially difficult period or balls ahead so it is a good idea to be alert for any weakness, as surprises are likely to come on the downside.

This article is not about market structure projection. It is about additional information which is representing the quality and behavior of this current move. We have discussed consistently, the Russell 2000 and Mid-caps 400 in the lounge and on the site. Earlier in the week we pointed out that daily resistance cycles would likely trigger if weakness of any decent quality occurred for these indexes. This has been the case, and currently the charts shown below show an unconfirmed daily resistance cycle shown in dark magenta. At the end of today, the cycle will confirm at whatever price marks the recent high and the cycle indication will turn bright magenta. This cycle is significant in a few ways and may suggest a clean rejection of prices if it is respected.

Not to be left out, the equal weighted S&P 500 index is represented below and has been showing ever increasing weakness, which translates to declining breadth, for the S&P 500 components. The index can be seen in cyan below. Additionally, the ratio of the equal weighted index to the cash market capitalization weighted index is shown in red. We can see that during this rally there has been a dramatic underperformance in the equal-weighted index ratio to the capitalization weighted index. All this suggests, less than reliable participation and large liquidations occurring within this up, move.

S&P500 Composite Index to Equal Weight Index

S&P500 Composite Index to Equal Weight Index

Russell 2000 and Midcap-400 Daily Cycle Charts

Russell 2000 and Midcap-400 Daily Cycle Charts

Mid-Cap and Small-Cap Price Failures Fulfilling Overthrow Potentials

As previously published, key to market behavior is the participation of the small and midcap's the expected behavior was an overthrow and possibly an attempt impulse to trigger an impulse. So far, with internals at the extremes of the day and prices appeared to be being soundly rejected on these indexes this is a key point to watch in the developing inflection point discussed over the last months on these pages.

Daily Cycles Small and Mid Caps

Daily Cycles Small and Mid Caps

MidCap and SmallCap Daily Cylces

MidCap and SmallCap Daily Cylces

Updated Daily/Weekly Market Structure Projections

Ready Or Not Inflection Point Approaches as Central Banks Seek to Destroy Bear Paticipation

It has indeed turned out to be an interesting week, with the Fed meeting causing fireworks as should be expected. Clearly, this was a coordinated effort, as posted in the MCM lounge earlier this week. The Fed has sought to cushion "changing of its wording or its intentions" with coordinated actions and hyperbole from other central banks. This is the type of behavior exhibited last year when, in seeking to prevent the per Bernake taper tantrum reaction that had occurred previously, they coordinated with the Bank of Japan, the Bank of England and the ECB to indicate or to actually trigger liquidity programs or accommodation. That sought to offset the impact of the Federal Reserve producing accommodation or leverage. This year has been exactly the same.

Clearly, the impacts of a Fed rate hike can set off a firestorm. There are tremendous risks to the creation of as much leverage as been irresponsibly created and to changing the cycle with reference to this leverage.

The primary risk being that the Fed is actually not in control of interest rates, after all and that a shift can take interest rates into their own direction, regardless of Fed desires. In order to make the Fed policy morph into an illusion of rational deduction and analysis based on data, and to facilitate the appearance of markets interpreting a change in policy as an indication of a sound economic environment, it is clear that the central banks were up to old tricks using unlimited liquidity to purchase risk assets on full bore yesterday. This appears to be yet another tactic "doomed to failure" of these irrational, inappropriate and highly risky policies. Indeed, the actions by the central banks appear to have sought to shake bearish resolve and encourage bullish speculation - and these conditions can obviously be seen in the risk markets presently.

The chart below is the market structure projection chart that we have been publishing for months. It has provided a good guide for the general movements of the markets. Recently is become clear that the markets which sometimes will move plus or minus a week to these projections have consistently been leading about a week since roughly May/June. In evaluating this behavior, we are presenting a chart which shows market structure projection both as it has been plotted and published on these pages - the dark magenta line, and also the same market structure projection plot shown offset by one week. As can be seen, especially in the near-term, these projections have been prescient and accurate. We are now entering timing tolerances shown by the boxed areas on the chart below that are probably for an inflection point. This coming inflection point is a very serious inflection point. Its significance implies a turn from up to down in the markets for the next five months or so - with weakness biasing into February and March next year.

Updated Daily/Weekly Market Structure Projections

Updated Daily/Weekly Market Structure Projections

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