Posts

MS Projection Update – Down Monday AM as expected…A look at what could be next

[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.

May 25, 2015 Daily and Weekly MS Projections

May 25, 2015 Daily and Weekly MS Projections

Drama in the Market Seas – a revealing look via the MCM Market Indexes

[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.

Drama on the Market Seas

Drama on the Market Seas

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 Indexes and MCM Smart Money Indexes

MCM Indexes and MCM Smart Money Indexes

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.

 

 

 

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

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 projection review

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.

May 20, 2015 intraday market structure postmortem

Market Structure Projection Update & Discussion

[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.

weeklyProjectionES

Daily & Weekly Market Structure Projections May 20, 2015

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 stateIntraday Market Structure Projection May 20, 2015

 

 

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.

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

Daily Market Structure Projection Suggesting Inflection Point Approaching

[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.

Daily and Weekly Market Stucture Projection

For reference, below are the Daily and Weekly market structure projections from April 1.