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Market Structure Projection Update & Discussion

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[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

 

 

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Daily Market Structure Projection have played out – more weakness ahead

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[dropcap]T[/dropcap]hough it looked a little iffy this morning with the inverted market structure low triggering around 10:30 am - right in the middle of the time window, and subsequent bounce reaction. The daily projection have indeed tracked out and imply another day of downward bias tomorrow. You can see that the markers at the end of the lines and how they correlated with the protections.

Keep in mind that these calculations are based on daily movements from 9:00 am to 9:00 am NOT the cash close to cash close.

Some very large shifts are going on in the larger time-frame market structure as market sets up for a significant turn...certainly, save for a short bounce in the very end of May and early June, implications are for a weak period ahead.

Daily and Weekly Market structure Projection

Daily and Weekly Market Structure Projections Update May 19, 2015

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3AM Time Window – a bearish tendency

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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.

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Intrady Market Structure Update – Inverted Probabilities increasing

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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

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Market Structure charts for S&P500

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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

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Today’s Intra-day market structure projection

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[dropcap]Below[/dropcap] is an example of intraday market structure projection for today. Key timing at 4 am and 10:00 am to 11:00 am for a potential day high. Only the inverted QE market structure suggests the possibility for a stronger close. This market structure is not playing in the key overnight session and, therefore, is relegated to not high probability at this moment.  So far, 20 year and QE market structure are tracking best and score the highest probability at this point. Time windows are very similar for both - pulling back after a 4:00 am high and then rebounding into the open.

As this market continues to wind higher in this Federal Reserve and central bank inspired inflation - it continues to follow the market structure/timing that their large footprints leave behind.

Intraday market structure projection for May 19th, 2015

Intraday market structure projection for May 19th, 2015

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Reference Post Regarding Historical Market Structure Projection

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[dropcap]R[/dropcap]egarding the previous post showing the current market structure projections, this is the first time that we have posted these charts on the new mcm site. Given that, there may be some unfamiliarity with these tools. This does not, of course, exist within the current community - which is very familiar with them over quite a long period. We thought that it would be of value to show a chart of the past projections and how our market structure algorithms tracked.

For this reason, below is an actual chart reflecting from April 1 that users referenced in real-time. None of the data on he projection lines changed from the future projection to the time they became historical - meaning as the future became the present. Keep in mind that though these methods have tracked well for a long time there is no necessity that they will continue to do so now. There is no reason for them to change their drift substantially, as we have found that markets are highly predictable and repeatable though the sizes of movements, distentions and reactions may not be.

Daily/Weekly Market Structure projections as of April 2015

Daily/Weekly Market Structure projections as of April 2015

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Daily Market Structure Projection Suggesting Inflection Point Approaching

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[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.