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An Overview of the Markets and Projections

While many are likely to have been turning their bearishness into bullishness over the last week or so, having confused bearishness and the potential for new lows in September where bullishness was warranted into November with of upward probability. Currently, we are sitting in a key timing window for the S&P500 as we have discussed recently and have high probabilities of a turn either being in as of the beginning of this timing window last week or possibly into this week (ideally early).

While we did expect back and fill earlier in the month of October from the 2140 area, the primary scenario expected strength into November. However, running corrections reduced the pullbacks that should have appeared early in the month to trivial events. Even though a correction/consolidation was registered on the charts, this correction period was classified as a running correction. A running correction is a pattern in which the impetus for market participants to interact with the market is so strong in one particular direction that what normally would be a price retracement pattern or consolidation becomes a consolidation with direction. Meaning, that instead of a consolidation pulling back it actually grinds upwards during the correction process when occurring in an upward market and then breaks out. These patterns are prone to very strong reactions in that many people attempt to short what looks like a breakdown that actually never occurs and immediately runs against them - thus trapping as many participants as possible. These patterns are powerful in up markets and in down markets and are occurring increasingly as greater intervention in markets occurs.

Given this, market structure projection indicated a pronounced period of upward bias throughout October and left translated MSP precisely indicated the previous turns. The market has been leading (which we refer to as left translation) the normal market structure projections. We represent this in the charts with the cyan plot showing the left translated projection which has coincided very well with activity in the markets over the last 2 1/2 to 3 months.

Moreover, market internals and other symptoms of ill health abound, regardless of hyperbole from analysts or the Fed - it appears things are not healthy. Preceding the August crash, the equal weighted S&P 500 index underperformed dramatically. This index has underperformed even more dramatically during this bounce. It is this analyst's interpretation that this is a sign of significant stress. The stress will need to be resolved, and if history is a guide, the resolution is likely to be stronger and quite likely more persistent than our August episode.

Note, the market structure projection for commodities and bond markets. These projections suggest equally interesting timing and also contradict the prevailing perception in the markets as to what are reasonable expectations near-term and even medium-term. It appears that there is a quite marked probability of a buy-the-news reaction in bonds combined with the sell-the-news reaction in equities and latent dollars strength to keep pressure overall on the risks markets. It also appears that the dollar may have a significant inflection point in December to early January, which may, in fact, be a larger sell-the-news type event.

Accumulation index components

Accumulation index components

S&P 500 Index - equal weight vs. capitalization weight performance

S&P 500 Index - equal weight vs. capitalization weight performance

S&P 500 market structure projection

S&P 500 market structure projection

US treasury market structure projection

US treasury market structure projection

Gold market structure projection

Gold market structure projection

US dollar market structure projection

US dollar market structure projection

Oil market structure projection

Oil market structure projection

MCM Newsletter – Outlook for Week 9-13 Nov

Executive Summary:
- Main Trend (weekly): down
- Intermediate Trend (daily): up
- Short-Term Trend (60min&135min): neutral
- MSP for the week: up

Details:
As mentioned in the previous newsletter, it seems the weekly cycle decided to prolong the suspense until the last moment and we are now looking to next week as decisive in the main trend confirmation or reversal. The past week had no dramatic change vs the previous 2 weeks, however the Dow cycle is getting now very close to reversing it’s impulse down. The MCM MA is close to crossing back over the impulse down level (point 1 on the chart). S&P is lagging, with both the price and the MCM MA being lower vs the impulse down level in comparison to the DOW. The current movement can still qualify as a back-test of the down impulses, however time is running out and bears pretty much have to turn the market more or less immediately (meaning next week) to keep the down impulse. That being said the main trend is still down, however likely to be reversed if the market holds up or goes higher next week.

weekly_8.11.

Weekly Cycles

The daily cycles continued their up impulses with both price and MCM MA being now significantly above the resistances triggered at 2015 ES and 17100 YM. With the impulse up established, the question is when (or even if) the back-test of the break-out level will happen and how deep will this back-test go. In the context of the weekly cycles this back-test becomes even more important and is not totally unreasonable to keep an eye out for it next week, considering the MSP (detailed below). That being said, the established impulse is up and that can pick up speed so caution is warranted both ways.

daily_8.11.

Daily Cycles

The 60 and 135min cycles had a significant development last week. Both finished their up impulses with a 3rd END (point 1 on the chart) and are currently just oscillating (i.e.not impulsing). Also, both put in support levels, 135min at 2089.25, which was broken by price, but then recovered, and 60min at 2077.25 which held quite well so far (point 2 on the chart). So very short term the direction is neutral to slightly up (if the support will hold), but given the oscillating nature, no clear trend is established. This information becomes more valuable in the context of the daily cycles. Considering that the 60 and 135min are fractals of the daily ones, it could mean that the 1st stage of the impulse up on the daily is over and a sideways or even corrective (the back-test of the impulse up) stance can ensue. This conclusion would be, of course, rendered false if the 60 and/or 135min start new impulses up, but will be reinforced if they start impulses down.

60&135_8.11.

60&135min cycles

The MSP for next week points to a significant inflection point coming up. It is possible that the market has already peaked if the top will be anticipated by 1 week, like the bottom was (point 1 on the chart). Alternatively the market could peak towards the end of next week (point 2 on the chart). Once the peak is in the bias shifts to weakness for the next 3 to 4 months. We have to draw the attention that the MSP is very useful for context and not to pin-point the exact day or hour of a turn. The turn can happen 3-4 days later or earlier and that would be considered close enough. Also, MSP does NOT predict the size of a move. The 3 to 4 months weakness might lead to a 50 points decline or a 500 points decline.

MSP_08.11.

Market Structure Projection

While Everyone Is Looking up – It Appears to Be Time to Look down for Quite Some Time to Come

At this time, despite just about every analyst, save a few, that we are aware of looking for new highs, we wish to point out that the risks appear to be to the downside well into next year. Just as the rally from August fooled the likes of high-profile analysts such as Tom DeMark, who expected the market to drift down through September and into October, and the abundance of wavers looking for fifth wave lows below 1825 - we do not expect that the market will want to be any more obvious for anyone than it was in August. However, as can be seen in the left translated market structure projection shown in blue on the chart below, while the persistence and lack of pullback of this move may have been a bit of a surprise for this analyst - the move itself, followed our general expectations nearly perfectly.

The implications of these projections are significant in that the next week or two are large potential inflection points for many markets. These inflection points are likely to carry weight for many months to come - not to mention disappointing the abundance of analysts and market participants looking skywards. Below is an updated market structure projection chart and we are now knee-deep in the turn window inflection point.

Also, please note that the BEAR IMPULSES PREVIOUSLY DISCUSSED ON THESE PAGES ARE STILL WORKING AND HAVE BEEN SO FAR ONLY BEEN RETESTED. The implication is that until these bear impulses fail, the larger direction and risk for the markets is down. We expected a retest in the 2060's  vicintity/area was a probability given the norms for impulse structures to retest their breakdown points. However, on the weekly charts we have overshot somewhat the impulse breakdowns by a little bit - although it has barely visible on our weekly charts (charts in a post we will publish tomorrow)...the impulse retest has indeed provided resistance to the ES futures and is a very good point for the market to do some soul search and to rediscover and begine the next phase of its larger bearish if it wishes.

We sent out an alert last night to members informing them and reminding them of the gravity and potential of this inflection point and also of the shorts that systems were triggering the close yesterday.

Daily and Weekly Market Structure Projections

Daily and Weekly Market Structure Projections

MCM Newsletter – Outlook for Week 2-6 Nov

For the benefit of the general public, considering that we are approaching an important inflection zone, we will keep this post open, however the future weekly newsletters will be limited to members.

Executive Summary:
- Main Trend (weekly): down
- Intermediate Trend (daily): up
- Short-Term Trend (60min&135min): up
- MSP for the week: up

Details:
No significant change in the weekly cycle compared to the previous week. The impulse down which started in week 35 is still valid - the price sliced through the support level which triggered at 2061.75 ES and 17353 YM (point 1 on the chart), confirmed afterwards by the MCM MA (which also came down through the mentioned level). That means that the main trend is still down. Compared to last week, the price advanced a bit more above the break-down levels (point 2 on chart), however not significantly enough and the current movement would still qualify as a back-test of the down impulses. The past week did little in terms of confirmation, so we are looking to next 1 week, possibly also the week after, to either confirm the main trend down or a reversal.

Weekly Cycles

If the weekly cycles did little in terms of confirmation, the past week brought a significant development on the daily cycles. Namely the MCM MA confirmed (point 2 on the chart) the price break-out (point 1 on the chart) above the resistances triggered at 2015 ES and 17100 YM. That means that the cycle impulse up on the daily is confirmed. The impulse is still at an early stage, and it can be reversed, especially considering the weekly development. Which is why also on the daily what happens next week appears to be of critical importance for the intermediate term direction.

daily_1.11.

Daily Cycles

The 60 and 135min cycles added even more nests to their upward impulses, by breaking above the END (or 2nd END) of their previous up impulses (point 1 on the chart). Currently the 60min has put in a capitulation bar (yellow bar on the chart) with a support level right at the lower end of the bar at 2069.5 (point 2 on the chart). Interesting is that 135min has resistance turned support very close, at 2066.75 (point 3 on the chart) and if we bounce higher from here, this would qualify as another back-test of the up impulse generated there. So very short term a bounce is the most likely option shown by the 60 and 135min cycles. If the bounce does not materialize and we break below the indicated levels, that would be important since it would reverse the impulse up on 135min and generate an impulse down on 60min (after MCM MA confirms).

60&135_1.11.

60&135min Cycles

The MSP for next week points higher with a significant inflection point coming up if it has not already occured. After the market peaks there is MSP bias for weakness over the next 3 to 4 months. When pointing out inflection points in the long term MSP it is important to mention that + - 3-4 trading days would be considered close enough. Friday is shown on the MSP as the peak, so we can conclude that the likely top is sometime in the 2nd half on next week or, if it's later, in the 1st half of the week after.

Recently the markets have been leading/left translating their peaks and the market IS presently in the window for a turn...it is not the objective of MSP to pick the exact hour and day of an inflection point but rather to point out a region of probability - be alert to any clues that a turn is occuring.

 

1.11.ES_MSP2

Market Structure Projection

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

Astoundingly Large & Precipitous Losses Hide in the Market Brew – Implying Large Deflationary Forces at Work

In a world of controversial and delusional claims by governments, central banks and economists of recovery and return to sound economic conditions out of the 2009 market and economic crash, this simply is not the case. It can be seen clearly in these indexes, that while nominal prices have been levitated, the actual distribution of return and therefore liquid value, has not. While the S&P 500 is only dropped a small amount since 2014, in reality large losses are being sustained by participants that are similar in size and stress as last seen in 2009.

Currently, we are experiencing a double bottom balance in the MCM Smart Money index, and also the MCM market close index. When this bounce concludes for these indexes, it is likely that the markets will resume a downward trend of these indexes will resume and break the 2009 lows. From all appearances, it would seem that very large deflationary forces, meaning contraction of credit and money is occurring at the very same time as massive printing and leveraging has been attempted worldwide. Clearly, those levitation efforts have failed.

It is important to respect what these indexes are suggesting both on a long-term basis and on a short-term basis. Short-term, it would not be surprising to see volatility in the markets but also a larger effort to metabolize the drop into the August lows. This would imply that after a near-term drop in headline prices for the major indexes, a bounce could continue into November. Via market structure projection, early November is looking like prime-time for the markets and a likely inflection point that will lead to a pronounced decline that is likely larger than the initial foray of August.

mcm Smart Money Index and mcm Indexes

mcm Smart Money Index and mcm Indexes

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