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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

 

“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.

Restrained Market Emotions Corroborate August Drop as Likely Downside Breakout

The VIX is a very dubious measure of emotion.

  • Firstly, it is subject to intense manipulation.
  • Secondly, it only reflects panic on drops.
  • Thirdly, euphoric behavior or panic at tops is not reflected or reliable in any form.

For these reasons, mcm eMotion and market fact analysis tools are much more insightful and reliable. What we can see from the chart below is that the markets are in frail shape and still bullish biased (via orange running cash inflow/outflow) - likely to the detriment of those bulls over the short to near-term. Signs of underlying bullishness will likely fight a good fight and remain as markets drop in the future. However, downside breakouts of emotion triggered hard well before the August weakness as can be seen below [4]. Ironically, emotional commitment on this bounce as well as commitment via funds being allocated to equities are mediocre to average at best...also, shown below [3 and 5]. While people may want to assume that the August drop was capitulatory, share directionality [2] and cash withdrawn from markets on daily basis [1] certainly reflect that illusion. These are in fact, more than likely breakouts and signs of much more to come. The reasons for this is the comparative low emotional fear and panic at the recent lows and the low eMotion and commitment to the current bounce. 

mcm Accumulation Index Components

mcm Accumulation Index Components

Note the nearing breakdown below 2009 lows of the mcm Smart-Money Index, the mcm Market Open Index and the mcm Market Close Index. Given the nature of these indexes, they suggest low balances in investor accounts and thus high leverage in the markets and a breakdown could cause dramatic stresses on the markets system as well as the financial system in general.

mcm Indexes and mcm Smart Money Index

mcm Indexes and mcm Smart Money Index

S&P500 Expert Lounge Update – August 25, 2015

Our last formal update forebode the breaking of the long term bullish channel on the S&P 500 cash index around the 2020 level and looked ahead to what could be the next levels of support. 2000 did not provide any support & subsequently 1980 did not either.  For the S&P 500 futures market, the open on Sunday August 23rd was yet another gap down & immediate breach of 1960 ES, which was a major support shelf.  This action pointed to a possible extreme scenario which subsequently played out in the overnight session. It is important to remember that when hyper trends end in either direction, like the one which ended with the breach of the long term weekly SPX chart (attached), an equal or greater acceleration in the opposite direction is highly probable.

Monday August 24th cash open was one for the record books as the DOW opened down over 1,100 points & the S&P 500 futures index was 'lock limit' down prior to open.  As you'll see, the market found it's first level of long time support & then proceeded to put in a wild ride of intraday volatility which is shown in the additional SPX chart & contains near term potential inflection points if the market is to resume an immediate downtrend.  The first obvious level is the downtrend channel.

Please adjust trading approach to factor in the volatility expansion when taking position sizes or your trading will also experience 'risk expansion'.  Stay patient & disciplined.

As always, please continue to monitor the Market Structure Projections via our blog at http://mcm-ct.com/blog/public/  and stay nimble in this market environment.  Good Luck to your trading

These are key MA levels: 2077 (200sma) - 2095 (100sma) -  2086  (50sma) -  2052 (10sma)

These are key support and resistance levels: 1867 - 2040

Bulls Find First Level of Long Term Support

Bulls Find First Level of Long Term Support

 

Near Term Symmetry for Probable Inflections

Near Term Symmetry for Probable Inflections

Market Consciousnesses – Running Through a Flux Capacitor

Today's action is a cause for some special attention. If you read these pages you will no doubt be aware that we have presented a scenario for analysis purposes that has been accurate, timely and disciplined. Using this approach, we were in front of the sharp rally and the downturn into today. We expected that today would likely be a weak day generally - given the intraday MSP posted this AM and daily flow projection shown on the day-of-week tendency subgraph on the longer-term MSP charts - Thursday's being the strongest close-to-close momentum to the downside. Regardless,  downside potential into the afternoon was highly reasonable and additionally a reaction/retracement/bounce would have been entirely reasonable as well and this was not forthcoming. Today, however, did a few things which are quite concerning.

We do not change analysis to fit the market, Rather we stick with our discipline and accept the distribution of inaccurate projections and unfulfilled probabilities as valuable feedback and information. That is EXACTLY WHAT IS HAPPENING at the present. Though the markets are currently on track with our analysis and we still expect a bounce in the near-term into early September, there were key deviations and issues with today's reflections of market consciousness via our tools that deserve some special discussion.

August 18th, 2015 eTick-Tools X-Tick Breakdown

August 18th, 2015 eTick-Tools X-Tick Breakdown

You may hear us refer to "X-TICK" triggers. X-TICK's are rankings of ultra high emotional exertions by market participants to sell/buy as a part of capitulatory extreme behavior. Capitulation in our terms is described in more detail under the eTick-Tools Core Concpets pages. In order to trigger an X-TICK the urge to sell and energy invested has to rank in the top 19% percentile (most of the time higher) of all selling efforts and events over the last 15 to 20 years. As you can imagine this is not an easy thing for the market to do. Today we opened with an X-TICK and got a decent bounce from it of something like 8 or 9 ES futures points. However, the thing with X-TICKS is that professional buyers (or sellers if the market is rising and generating a buy extreme -as the case may be) like to show up and take weak handed contracts when they are made available - X-TICKS are precisely these types of areas. WHEN these professionals then subsequently get run over the X-TICK is broken and it is demonstrating that the market sellers have real conviction. This was expected this morning and occurred. However, this afternoon we got two more X-Ticks that ranking in the top 9% of all selling emotion extremes in the last 15 to 20 years, and though each got a 5 point bounce or so - they were broken subsequently. Additionally, each X-TICK was at a lower and lower price which is a sign that professional buyers with conviction were not shifting the trend and ineffective. Breaking this many X-TICKS in one day is a serious event and a sign to remain alert. This is a sign of increasing risk to the markets capability to stage its reversal. This can not be overstated. Each X-Tick today, being lower than the previous one, indicates a significant capitulation going on among market participants as a whole. This is always something to keep an eye on.

First thing this morning we got a reasonable negative GAP TOOLS emotional analysis that suggested that the market had normal probability distribution for a gap fill. In this case, that means: "not that likely but plausible". However, it got a high rank (on the first bar of the cash session when it's analysis is scheduled to trigger) that a breakdown would occur below the opening range. This was a large negative as it is often that such an event can lead to a trend day down. In this case, trending down was expected into the 1;30 to 2:00 pm timing window in the afternoon.

There were quite a few reasons that the market was being afforded some room for a bounce this afternoon or in the near-term. Timing, longer-term market structure, convergence of support in the 2044 area (which was pointed out as a possible target for today), a neckline on a very large support shelf that also is a pretty symmetrical head and shoulders pattern and intraday behavioural analysis that would usually score towards some strength showing up this afternoon. As it turns out, the markets ran over these areas after setting up months and months of work above them without even reacting with a small bounce attempt - something reflected in the X-TICK breaches described above. The market had other plans for today. Primary degree support is at 2020.5 to 2010 on the SPX cash and probably is now a magnet before a bounce occurs.

One of the things that is very important to understand is that when the market does not follow market structure, as it began to do today, this is often a sign of a change in market consciousness. Market Structure, the way we measure it and define it, is an objective, transparent and unbiased analysis/evaluation of a market within its contextual probability skew. Therefore, when a difference occurs and especially one that is substantial, it is important to take notice. Today's deviation was just minor so far but could get much more if it wants - so, tomorrow and the next few days will help to make things much more clear. Currently this tracking deviation from probabilistic market structure scenarios, is of significant concern, An analogy of this effect if similar to hitting the brake pedal in your car and instead of the car slowing down it speeds up. It's an indication that something is wrong and it's a warning that aberration and risk is increasing.

Additionally, we closed below the neckline of the 6-month head and shoulders - breaking through it without even bounce at the 2043.5 SPX Cash area - this is very concerning.currently, the market most likely needs to go lower a bit, probably to the 2020 area and then attempt its bounce - which as mentioned earlier should be expected into early September. September offers an early month high or possibly a higher high around the 21st. Currently, as mentioned in today's AM post, favored is an early month high for the US markets with a lower high retest into the 21st. HOWEVER the capacity for this bounce attempt to be very small or worse to become a running pattern is of significant concern as this could easily lead to a panic. Given how much leverage and risk the Fed and other central banks have infused into the risk markets it is is notable importance how markets react to a bounce attempt into early September. If the bounce if very weak and thin, it would be a good idea to increase power to the flux capacitor and prepare for an emotional and high volatility future.

The Invitation

by Oriah - Mountain Dreamer

It doesn’t interest me
what you do for a living.
I want to know
what you ache for
and if you dare to dream
of meeting your heart’s longing.

It doesn’t interest me
how old you are.
I want to know
if you will risk
looking like a fool
for love
for your dream
for the adventure of being alive.

It doesn’t interest me
what planets are
squaring your moon...
I want to know
if you have touched
the centre of your own sorrow
if you have been opened
by life’s betrayals
or have become shrivelled and closed
from fear of further pain.

I want to know
if you can sit with pain
mine or your own
without moving to hide it
or fade it
or fix it.

I want to know
if you can be with joy
mine or your own
if you can dance with wildness
and let the ecstasy fill you
to the tips of your fingers and toes
without cautioning us
to be careful
to be realistic
to remember the limitations
of being human.

It doesn’t interest me
if the story you are telling me
is true.
I want to know if you can
disappoint another
to be true to yourself.
If you can bear
the accusation of betrayal
and not betray your own soul.
If you can be faithless
and therefore trustworthy.

I want to know if you can see Beauty
even when it is not pretty
every day.
And if you can source your own life
from its presence.

I want to know
if you can live with failure
yours and mine
and still stand at the edge of the lake
and shout to the silver of the full moon,
“Yes.”

It doesn’t interest me
to know where you live
or how much money you have.
I want to know if you can get up
after the night of grief and despair
weary and bruised to the bone
and do what needs to be done
to feed the children.

It doesn’t interest me
who you know
or how you came to be here.
I want to know if you will stand
in the centre of the fire
with me
and not shrink back.

It doesn’t interest me
where or what or with whom
you have studied.
I want to know
what sustains you
from the inside
when all else falls away.

I want to know
if you can be alone
with yourself
and if you truly like
the company you keep
in the empty moments.


Our invitation is not nearly so eloquent, however, we invite you to some introspection regarding the markets, your trading and our non-correlated, objective and prescient tool-set. In an effort to increase discussion on the blog, comments to posts and participation in the mcm community we are offering for a short time, an invitation to join us and to learn to see "market things" in a new way, a deeper way, a more authentic, unique and honest way. 

mcm tools are not "see-ers" or random predictors, signals or neural networks that increase your frailty with each step. Every piece in our toolset reinforces the other. An MSP does not track is as useful as that that does because these are true probability analyses - not random guesses regarding the future or its potential. Similarly for emotional extremes with eTick-Tools, these are not lines on a chart but emotional capitulations where market participants are measurably stressed. Reactions at the areas are real and objective points to leverage the conviction and opinions of participants. Its the same with market cycles and our market internals - each look at pieces that no other analysis does in an effort to understand a deeper meaning - perhaps even what the market is like in its most empty moments.

Join Our Community by Clicking this Link - No Fees - No Credit Cards - No Gimmicks and No Unnecessary Commitments

S&P500 Expert Lounge Update – July 15, 2015

Best to your trading & welcome to our new subscribers

These are key timing for today:   8:30 AM - 2:30 PM EST 

These are key MA levels:  2095 (100sma) - 2100 (50sma) - 2090 (5ema)

These are key Fibs: 2097 - 2107 - 2115

Good day

Here is today's pre market look at the S&P 500 for  July 15, 2015 and good luck to your trading:

 After closing in the first target area on Monday, SPX ran into the second tier of potential resistance yesterday & stalled at the .786 retrace of the recent swing high to swing low posting a high of day at 2111.98.  A similar Fibonacci retracement from all time high to swing low lies just overhead at the 2115 level. If the market manages to clear the highlighted price levels, the probability of a move back to all time highs certainly increases.  Market Structure Projections also have the potential for a key pivot today, so it is optimal to manage long exposure accordingly for the imminent future.

Once again, manage risk, Good Luck and do not forget to keep close notes on the key timing via the MSP as they evolve http://mcm-ct.com/blog/public .

2015-07-15_07-55-27 bear pivot or ath

SPX Key Inflection Point

 

Significant Downside Probability Dead Ahead

If you monitored the work published on this site and that our community has received the last weeks, the daily directional projections have been correct 10 out of the last 11 days. Additionally to that, they have been directionally correct for almost 90% of the previous 30 days which can be documented on the site. In addition, the intraday projections have been playing out every day this week usually to within an hour accuracy with 90% directional precision - certainly well beyond our objectives and also a continuation of the uncanny accuracy of the methods and data.

July 7th, 2015 Daily & Weekly Market Structure Projections Update

July 7th, 2015 Daily & Weekly Market Structure Projections Update

After reviewing the data into the close this week, probabilities for the next 4  weeks or so, are likely to be characterized by weakness generally, with probability for Wednesday or Thursday strength (not both days but only one per week). The likelihood is for only about 1.3 up days per week. Specifically, it looks now most likely that this coming Monday (max Tuesday) is likely to represent a turning point and that the odds for a measured rally are not likely until mid-August.

Highest likelihood near-term is for persistent weakness. From a logical standpoint, it is fairly unreasonable expect volatility to subside which indicates that the option for a subdued consolidation decline is not high odds and more that the odds for a significant rally that is virtually totally unsupported by any probabilistic data is very low. Therefore, this reiterates the prospect for weakness over the next weeks with lower highs on rallies that start around the 2nd week of August into September .

The operational assumption is that September into October is most likely to form a large right shoulder of some form - that will be seen. After this week's activity closed today - confidence in these probability scenarios, as presented, is significantly increased. Of course reality will tell.

One of the additional reasons for more negative potential is a result of intraday MSP overwhelmingly turning toward negatively probability. In addition, to daily and weekly market structure projection (MSP), general tendency MSP, which projects broadly conformed and context relevant wave structure into the future - favors towards the negative.

With macro issues like margin debt almost doubling in the last 2 weeks in China, the Greek saga and significant credit stresses in Portugal, Spain, Italy and many eastern block countries over the last week, it seems that the near term context is not supportive of a calm retracement or sustained rally appearing on the horizon. The best outcome for the markets seems to be to lay with the possibility for a significant rally into early next week - probably on gaps which is another issue with the idea of something constructive emerging.

Moreover, its is somewhat alarming looking at the mcm Indexes which will be updated and published once more this weekend. It seems simply unlikely that any rally of significance can be built on the back of the horrid losses being absorbed by investors in the current markets that are represented in the indexes:

 July 2nd, 2015  mcm Indexes

July 2nd, 2015 mcm Indexes

While the data interpretation could be wrong, or this data may just plain be wrong, shorter term probability analysis will certainly adjust in that case. But seldom have we seen so much downside probability than presently. The exception is that October this year appears setup for much more extreme downside. The end of the week the picture has firmed and upside into Sept appears most likely to be a lower high and very volatile with volatility excursions generally favoring negative surprise.

Longer-Term Market Structure Projection into September

X-Ticks and Central Banks – What is Probability Thinking?

They do not make markets like they used to. Price discovery is more like Price delivery. Market sentiment feels more like market cement. People are so used to centrally planned corruption of the markets that the current repercussions are not easy to be believed because there are 257 central bankers pontificating about how they stand ready to provide liquidity that NO ONE WANTS.

In the chart below is a reprise of the current Daily and Weekly MSP. There is no way to assume what may be coming over the weekend or how high that push could be if it were to happen...but Thursday AM into Friday AM is a currently holding probabilities that are pretty weak. Of course, that does not mean they have to happen. But as can be seen from the chart below, the white line is the projection for daily price direction from each AM to AM session. The market has been respecting the general directional probabilities. [1] and [2] are plots into the future from now until Friday AM. There can be lots of volatility, but the base case has not changed, and impulse is down.

It appears the real trouble starts next week...is this week the preamble?

In my experience, MOST analysts miss tops and bottoms because they are looking for too many ideal scenarios and setups. The nice thing about probabilities and data are they are what they are and will simply be wrong or right. But they are not likely to get stuck in the human need for confirmation bias or over thinking.

For reference to the X-Tick activity today that was simply stunning see this post: Overview of Today’s e-Tick Tools Intense Emotional Extremes

For reference, the vertical lines on the chart below represent 9:30 am on a daily basis.

July 7th, 2015 Daily & Weekly Market Structure Projections Update

July 7th, 2015 Daily & Weekly Market Structure Projections Update