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Is More – Less? – Central Bank Policy Fears Appear Ready to Create a Large Quanity of LESS

Confusion over central-bank policy, financial system leverage, economic stability/prospects and impacts of quantitative easing, have created volatility and triggered an epic short squeeze. As confusion reigns and bulls become bullish they may attempt to attribute advancing prices to fundamentals or to expected central-bank policy for support. However, it appears that the US Dollar may find a bottom sometime this month and rally strongly into January. The initial start of the dollar rally appears likely to be composed of something of a shock. The question is will the markets believe it? Additionally, for this analyst the question is "will the markets be able to deal with it?"

Near-term, however, it is important to state that equity markets are poised for a pronounced decline for a week or possibly more which may be arrested at that point and rally again towards the early November.

US DOLLAR Market Structure Projection

US DOLLAR Market Structure Projection

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

Finishing with a Flourish? Projections Suggest Weakness Ahead

We are approaching key areas as shown on the Levels charts. 1990 to 2010 is a significant area on the SPX cash index. It would be reasonable to expect a reaction from this area. Additionally, market structure projection suggests early strength is likely to be dissipated into the afternoon. Moreover, Wednesday and Thursdays directional bias is significantly weaker. On top of market structure projection suggesting weakness ahead, which could be pronounced - we have the moon cycles – which are approaching the last moon and a new moon series. A weak reaction to the last moon could intensify the reaction to the new moon. Below is a chart of market structure projection for the intraday, which suggests timing around 10:30 AM and 2 PM. Either area is a valid place for the market to turn from upwards to downloads, 10:30 AM is the higher probability. However, to put things succinctly, the general expectation is latent morning strength leads to afternoon weakness.

Other data to note, is that the bias for strength this month ends on the fourth trading day of the month - this is where he currently sits. The implication is not that the market needs to fall apart after that, but rather that upward potential wanes. In this case, given the size of the retest of the currently working bear impulses a pronounced reaction would not be surprising. We want to reiterate again, that this rally does not fit into the structure of a bull market presently due to the working downward impulses on the daily and weekly charts and also the bias of the systems towards "bear market" predisposition.

Oct 6th, 2015 Intraday Market Structure Projections

Oct 6th, 2015 Intraday Market Structure Projections

SPX Cash Levels Chart

SPX Cash Levels Chart

As Expected, Bear Impulses Continue Last Week’s Retest Before Next Drop

As, posted last week in this post: Bear Impulses Retesting Before Next Drop, and this chart, significant retesting of a the currently in-progress downward BEAR IMPULSES should be expected. We indicated that testing in the 1990 area would be normal/ideal - and preferred between 1950 and 1990. Though it is totally normal for impulses to retest the breakdown point directly, in this case, that is NOT the highest probability outcome and would expect a retest that looks similar to the retest of the upward impulse shown on the chart below, but as stated in last week's post the option of a direct retest of the breakdown must be respected.

We are presently looking for BEARISH RETRACEMENT triggers (Magenta BR Labels) on the Daily and Weekly charts which will likely lead to pronounced weakness and subsequently the dissipation phase of the current Daily and Weekly Impulses.

We had a tremendous week last week in the lounge, with prescient and powerful signals triggering for upside into the NFP report and also, Market Structure Projection, eTickTools and Accumulation Indexes nailing the low on Friday morning in the 9:30 to 10 AM area and at that time suggesting a close near the high of the day as the most probable outcome.

Given the overall setup, IT MUST BE STATED AGAIN for the record, that impulses usually retest and they require more attention that we had received up till Friday last week. Friday was a solid step in the right direction. Interestingly, HAL and RVS systems began triggering initial SHORT risk entries which ideally get additional entries higher - these systems are very reliable and the fact that they prefer to sell this rally is significant.

Also, in last weeks, post, we specifically mentioned that into the first 3 or 4 trading days of this month bullish potentials are probabilistic. This remains the case, however, starting on Tuesday's AM cash market open, forces turn much weaker with Wednesday being particularly so.

Additionally, IT NEEDS TO BE RESTATED, the markets are in BEAR IMPULSES which implies much further downward pressure to come and does not view this retest as bullish. Nor do RVS and HAL, which contend that the bias in the markets is now statistically a BEAR MARKET. According to very long-term Market Structure Projection overall, downward pressure (ofcourse, with strong rallies interspersed) are probable into March/April next year.

Weekly Impulse Retests

Weekly Impulse Retests

Daily Impulse Retests

Daily Impulse Retests

In closing, We REMIND ONCE AGAIN AS IN OUR LAST POST, that once the shorter-term charts start generating downward impulses, starting from the very short-term 1, 2, 5 and 15 minute charts, risks for downwards progress increases significantly and that type of activity, shorter-term impulse generating fractals across time frames will certainly be in place when we complete upward structures on the intermediate-term to longer-term cycle charts. This can happen, starting at any time. Complacency in this market is not a good option. While the markets can extend upwards, these are fickle upward impulses can truncate abruptly.

“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.

Major and minor updates to eTickTools

Lots of Stuff and Projection Update

This weekend we completed a major upgrade of charts and chart streaming for the mcm site. We added significant new enhancements to the eTickTools Project and we rolled out some new analyses - Historical eMotional Extremes.

From a housekeeping standpoint we will bullet-point the list.

  • Fixed Cycle Display and Markers on 5-Minute chart
  • Fixed Scaling issue on 1 and 2-minute charts
  • Addressed the printing of a double "potential stop-run" when triggering at the open for eTickTools
  • Added Percentile Ranking for each buy and sell-extreme for eTickTools - this is a big deal
  • Added a Ranking for the volume extreme taking place during a Buy or Sell extreme for eTickTools
  • Added auto updating Historical Extreme Charts for both the S&P500 and DOW
  • Added an alpha toolset for DAX that is just in testing phase
  • Added various other general clean-ups and labelling for tools and charts

The additions of rankings to all the eTickTools extremes is a significant enhancement and allows an unprecedented and high quality of gauge of the amount of effort the market is exerting at a specific capitulation point. The addition or a ranking of the amount of transaction at the point is also a significant enhancement. We encourage you to ask questions regarding any of the enhancements.

Major and minor updates to eTickTools

Major and minor updates to eTickTools

Regarding the markets, Daily/Weekly market structure projection has suggested that a consolidation after the projected bounce during the 1st week of September occurred. This is indeed appearing to be playing out. Markets are very bearish and people are very scared which could contribute to a pause in down movement and leads to strength into the week of the 21st. It needs to be made clear that these are contextual time ranges. If you have been reading these pages, you now doubt know that week 1 of September has been viewed referred to as potentially important point for the markets and as such could be a significant turn from an up move to down to new lows or in the more likely case, a down move that comes in the form of a period of consolidation for further highs into the week of the 21st. Additionally, note that MSP was correctly projecting weekly weakness into Thursday, August 20th. However, the turn from down to up did not come during Thursday's day session as projected but rather 9:30 AM on Monday - 1.5 sessions away. It seems to us that a projection made several months ago for a down week into Thursday the 20th being met to within 12.5 cash trading hours is about as accurate as one can reasonably expect during a market dislocation and certainly more accurate than most wave extrapolations and technical analysis would usually be able to be with any reliability. This condition resulted in needed in to rely on shorter term tools: eTickTools and Cycle Impulses for example. We did a webinar on these subject (http://mcm-ct.com/blog/webinar-follow-up-and-content/) and plan another because in the coming markets impulsing beyond emotional extremes and through cycle supports is a key tool that can objectively help to remain on the right side of a market even when the desire of a trader are to take the opposite direction - such as buying weakness when in fact an impulsive move downwards may just be beginning.

As such, eTickTools did an exemplary job of pointing out that the markets were likely under a severe capitulation by triggering multiple X-Tick downward selling impulses during that Thursday's session.  We made this post wich is a good reference: Market Consciousnesses – Running Through a Flux Capacitor. Indeed, the markets have been rushing back through time and retracing the gains of the last years. The danger continues to be high, though for the time being abated somewhat.

DAX Market Structure Projections

DAX Market Structure Projections

Below is an updated chart of the Longer-term MSP (Projections) for the S&P500. With the DAX suggesting a shallower pullback, edge is increased that probability of consolidative behavior for S&P500 is increased into strength into [5] on the chart below. This chart is suggesting a period of consolidation/weakness and then a push into the long referred to week of Sept 21st.

S&P500 Market Structure Projections

S&P500 Market Structure Projections

Projections Suggest a Significant Turn in September

It has been a wild week or so. We have been asked often recently regarding short-term MSP and why we have not been publishing. The question has been more-or-less: "has the effort of publishing this data ended and is that why short-term MSP has not been published". While it is correct that this data takes a lot of effort to build and is not principally created for the general public - this is NOT the reason that we have not published these data. The reason is that when the markets become as volatile and emotional as they have been, the best thing to focus on is the larger picture and the fundamental near-term emotion and price movements of the markets. Sometimes it takes a few days for the markets to overshoot - which seems to be the case curgently. Markets may be in an altered state of reality...we have been referring to the market being on "METH" the last week or so in the "Lounge". Therefore, we have felt that short-term market structure is more of a distraction then needed and only been referring to it judiciously as it points to highly probable data point inflections and probabilities.

So, what is the bigger picture? It appears that there is a tremendous amount of coincidence pointing to the 3rd and 4th weeks of September. In Gold, the US Dollar, Oil, the Dax, EuroStoxx 50, S&P500 etc...all have confidence for a probability for  a risk reversal in the mid - to latter part of the month into the end of October. Ironically, for risk assets - despite the anarchy going on in the world - there seems to be a predominant bias for a bid in the markets into this coming week - most probably mid weekish. A reaction from these areas are to be most interesting. Some charts have broken down into potential downward impulses and these patterns would usually imply a retest of the breakdown area - which coordinates with the levels charts on the SPX cash posted earlier - suggesting a retest of 2010 at the very low end and up to 2090 on the high-end. 2045 to 2060 SPX cash seem like a serious area to watch. But these price levels have nothing to do with MSP and are just educated guesses.

Another element arguing for further time for upside is that the normal up wave for a 60-minute bar calculated wave is around 155 hours. This would fit well with mid-week. However, given the veracity of the move down a bit more time could be required additionally.

Below are some updates to the MSP charts that cover this probability scenario:

August 30th, 2015 S&P500 Daily & Weekly Market Structure Projections

August 30th, 2015 S&P500 Daily & Weekly Market Structure Projections

August 30th, 2015 DAX Daily & Weekly Market Structure Projections

August 30th, 2015 DAX Daily & Weekly Market Structure Projections

August 30th, 2015 EUROStoxx 50 Daily & Weekly Market Structure Projections

August 30th, 2015 EUROStoxx 50 Daily & Weekly Market Structure Projections

August 30th, 2015 Oil Daily & Weekly Market Structure Projections

August 30th, 2015 Oil Daily & Weekly Market Structure Projections

August 30th, 2015 GOLD Daily & Weekly Market Structure Projections

August 30th, 2015 GOLD Daily & Weekly Market Structure Projections

Centrally Planned Unintended Consequences – Oil – Now Nearing Inflection

In a chaos created by abcent minded centrally planning there is OIL. It appears that oil is nearing some inflection point and is another market to add to the early AM post.

Crude Oil Daily and Weekly Market Structure Projection

Crude Oil Daily and Weekly Market Structure Projection

Intraday Projection: Deferring to the Larger Picture

Be warned today can be a tough one for the bears during the day session. One needs to prepare for that. Today is a more or less modal situation around the open. If we reverse any strength into the open - probabilities prefer down into 1:00 PM (with possible acceleration at 2:30 PM) or the reverse. Keep in mind that a move today could become persistent.

On the bigger picture front, Daily Market Structure Projection, as posted last week, indicated a turn Tuesday AM from an upwards directional movement to downwards movement. This has occurred. Today probabilities were also for a lower AM session than yesterday AM. This has occurred, and the condition is met. The largest potential downside momentum in terms of points is suggested with a down AM session into Thursday AM. This can be pronounced and test the 2065 to 2044 area if it wishes. Be aware that we are likely entering another central bank bubble blowing contest and may take an intervention attempt and classically like all central bank activity - will be over done. So, move into early September from a potential central bank panic this week may be torture for shorts and, ironically a windfall for a only a few days for longs who will likely have similar frustration in reaction to it. Strong drop after first weeks of September.

August 19th, 2015 Intraday Market Structure Projections

August 19th, 2015 Intraday Market Structure Projections

Intraday Market Structure Projection Update

The market has been struggling and chopping around as well as chopping traders up. Yesterday's session generated some emotion - finally. Two X-Ticks set up some key near-term psychological levels between 2086 and 2087 on the ES futures. Sustained trade above or below this range is likely significant. Probabilities favor an upward bias overnight into roughly the open, as discussed in the lounge. The overnight session has been tracking. The highest probability is highs into around 10 AM and weakness thereafter. Sustaining a reversal out of 6:30 AM area is more bearish but also tracks the general overnight projections for AM highs. Weakness into 10:00 to 10:30 AM with a bounce would shift probabilities towards strength into the afternoon and decent positive bias for cash session.

August 5th, 2015 Intraday Market Structure Projections

August 5th, 2015 Intraday Market Structure Projections