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The 2015 January Effect: Status – On Track

[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.

MCM January Effect Analysis

Market Structure Projection Today – Weakness probable – 9:00 am key – Bi-modal situation

[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.

May 21, 2015 Intraday Market Structure Projections

May 21, 2015 Daily and Weekly Market Structure

May 21, 2015 Daily and Weekly Market Structure

Yesterday’s Projections vs Today’s Reality

Comparison of intraday projections from yesterday's posts compared to today's reality...

May 20, 2015 projection A/B comparison

May 20, 2015 projection A/B comparison

Correlation match to model market structure projection posted yesterday evening and early AM

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.

May 20, 2015 Intraday Market Structure Projection

May 20, 2015 Intraday Market Structure Projection

Below is the for the daily and weekly market structure which has been highly accurate.

May 20, 2015 Daily and Weekly Market Structure

6:00 AM lows held – Key timing NOW if upside to follow through

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

Keep in mind that Thursdays are characteristically biased to be weak at this time in May

Intraday Update – Timing Window Approaching

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.may 20, 2015 intraday market structure projections

 

Projections – a View Back & Forward

[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.

Market Structure Projection - A Historical and Longer-term View Forward

Market Structure Projection - A Historical and Longer-term View Forward

 

 

3AM Time Window – a bearish tendency

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.

2015-05-19_1720_3AM_MarketStructure

3 AM Market Structure trading for US futures

if the image, being that it is so large, fails to load you can used this link for the large image.

Intrady Market Structure Update – Inverted Probabilities increasing

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.

2015-05-19 Intraday- inverted market structure probabilities increasing

2015-05-19 Intraday- inverted market structure probabilities increasing

Market Structure charts for S&P500

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

Current Daily Market Structure Projection

Daily Market Structure Projection

Daily Market Strcuture Projection History

Reference Daily Market Structure Projection History as of April 1st, 2015

for May 19th, 2015

Intraday Market Structure Projection for May 19th, 2015