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MCM Newsletter – Outlook for Week 28 Nov – 2 Dec

2 words can easily characterize the action of the past week: grind higher. The cash market was only opened 4 trading sessions or better said 3 and a half, but managed to score new ATHs in 3 of those days. Less impressive was the actual movement in terms of points, being only around 20 points above the high registered in the previous week. Will this prove to be the proverbial calm before the storm?
Nothing new to report on the weekly cycles. Still looking for a resistance to trigger which will likely point the turn. But still no clear sign about when one might trigger.

Weekly Cycles

Weekly Cycles

The resistance triggered on YM on the daily cycles failed to stop the advance. The market broke through so it remains to be seen if the resistance on ES (once it triggers) will be more respected. The directionality tool is still at the maximum point and it will be important to see when it will turn lower, as confirmation of a likely turn.

Daily Cycles

Daily Cycles

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MCM Newsletter – Outlook for Week 14 – 18 Nov

What a week! It’s hard to keep the exclamations away in a week that saw an intra-day drop of more than ES 100 points to reach a limit down suspension and then a full reversal to come back, open the cash session only slightly in the red and keep rallying to close the day green. It was a Brexit type event, except it was faster. After Brexit we had a big drop, a dead-cat bounce and then the next day the markets made a new low. Now we never got that. Market bottomed in the overnight and then never looked back. People who were short in cash instruments must’ve had a really bad day, seeing the market 100+ ES points down and then opening nearly flat. Which proves once again that a large part of the action has moved outside the regular trading hours. The mcm tools caught the bottom quite nicely, signaling the exact low with a sell X Xtick on v-tick tools and then despite what looked like (and was) a huge bounce, it never triggered a buy Xtreme until the RTH started.
But as always the big question is what now. The weekly cycles put in a very large candle, with a LRE (lower risk entry) for longs at the bottom of it. Both ES and YM spiked below support, but recovered it and we are now looking for resistances to trigger higher. Once that happens, that would be a strong sign that another correction is coming. ES is still in an up impulse which would likely be over once an END resistance triggers. So reaction in the opposite direction could be strong.

Weekly Cycles

Weekly Cycles

Zooming in to the daily cycles, these also spiked below supports and then recovered them strongly. So we have the the same expectation as for the weekly - watching for a resistance level to trigger. We did get some LRE (lower risk entries) for shorts, however the mcm-MA just recently changed bearish (red color) and we can see from such past events that in this case, the LREs are not very reliable. The directionality tool is moving upward and has been doing so for a while, actually since before the “Trump-win” Brexit like event. It will be important to see when it peaks and starts moving down.

Daily Cycles

Daily Cycles

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MCM Newsletter – Outlook for Week 21 – 25 Nov

Compared to the election week Brexit type event, last week saw things calming down. Although the intra-day swings in ES were 20+ points in the first 2 trading days and then 15 points in the last 3, that felt like no volatility at all. The market managed to continue to grind higher although the high from the election week was barely overtaken by 5 points.
Considering the absence of major swings, it is no wonder that the weekly cycles saw no major developments. The directionality tool finally bounced from it’s minimum level confirming the ongoing bounce. As previously stated, the cycles now need resistances to come up which would be a strong signal that the bounce is coming to an end. Of course, to anticipate where these might trigger we have to look at the shorter timeframe cycles.

Weekly Cycles

Weekly Cycles

Zooming in to the daily cycles, these also spiked below supports and then recovered them strongly. So we have the the same expectation as for the weekly - watching for a resistance level to trigger. We did get some LRE (lower risk entries) for shorts, however the mcm-MA just recently changed bearish (red color) and we can see from such past events that in this case, the LREs are not very reliable. The directionality tool is moving upward and has been doing so for a while, actually since before the “Trump-win” Brexit like event. It will be important to see when it peaks and starts moving down.

Daily Cycles

Daily Cycles

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mcm Market Update for Week 44

The action over the past week was decisively bearish. The market continued the downside movement started 2 weeks ago and declined in all 5 trading sessions reaching a 70 points decline in 2 weeks and more than 100 points lower vs. the August and early September peak. Continuing the bearish signs, the market broke decisively below the trend line connecting the last significant lows (the one from February and the one from June). But of course, the real question is: what now? Will the market continue lower or is a bounce in the cards?

Looking at the cycles, we can see the same bearish signs: the weekly support level on ES was broken, despite it having higher odds of holding. YM also broke its support, albeit only marginally (shown on chart). The directionality tool did provide a nice warning that the bounce after the initial decline was not going to hold, by continuing to move lower throughout it. It is currently at the minimum value and if a more significant bounce is coming, it will start moving up. We also have a LRE (lower risk entry) for longs on YM and as we can see in the past (highlighted on chart) these have the potential to trigger a big bounce. A 2nd consecutive one triggering next week will definitely be something to watch for.

Weekly Cycles

Weekly Cycles

As we were mentioning last week, the daily cycles were bearishly inclined and the market delivered just that. YM was in a confirmed impulse down and it had triggered a 2nd bearish retrace (BR) resistance level which normally needed a 2nd END support lower. The market moved decisively lower, so now we are on the look-out for a support level to trigger. ES also triggered (late) a resistance just above the previous support and then a new support lower, which was slightly broken. Going forward it will be important to see when a support level will trigger on YM. That would be a big warning that the decline is at least pausing for a while.

Daily Cycles

Daily Cycles

Revisiting our potential Elliott Wave ending diagonal on the NYSE Composite from previous updates, it is very obvious that we've broken the rising wedge pattern and have begun to sell off.  This brings in a demarcation point where the diagonal structure becomes invalid because in a contracting ending diagonal, wave 2 must remain shorter than wave 4.  We've marked that level where that is no longer the case and at which point we can begin looking for much lower prices as the next viable structure would bottom in the 9600 to 9500 area.  Futures are markedly green at present so a challenge of the upper area of the declining wedging pattern is a relatively good probability at this point.  Good luck this week.

NYSE Composite

NYSE Composite

mcm Market update for week 42

More sideways action the past week, as the market didn't move much in terms o price, but was again range bound. After putting in a low on Monday, the market gaped up on Tuesday, but the up movement was short lived as the last 2 days of the week saw the market retreating again.

This choppy back and forth finally triggered a change in the weekly cycles - both ES and YM triggered new support levels. This fact has 2 important implications. First, the previous impulse up on ES is reversed, both ES and YM being in normal oscillations now. And 2nd - the new support level is now the critical one to watch. The normal expectation is for the market to move up until a new resistance level is triggered. The directionality tool continues to move down so it will be important to watch how it acts going forward. If the market can’t bounce and the support gets broken directly, that would be very bearish.

Weekly Cycles

Weekly Cycles

The daily cycles also have supports in place. ES did whipsaw its support level, but the market didn’t break down, so a down impulse was not triggered. This also points to up movement as the normal expectation, same as the weekly cycles, and here also the directionality tool is moving up so it would be interesting to see if it continues to do that.

Daily Cycles

Daily Cycles

MCM Market Update For The Week of October 9, 2016

The market continued to move sideways over the past week and despite the rather big intra-day fluctuations, remained range bound.

Considering such action, it's no surprise that no real development was registered on the weekly cycles. As previously mentioned the potential of a successful back-test of the 2105 break-out level is still there, but it's not a given at this point. The directionality tool continues to head down which is another warning that the market is not decisively bullish just yet.

Weekly Cycles

Weekly Cycles

The interesting development last week came from the daily cycles. After getting a 3rd END resistance on ES 2 weeks ago and marking the end to the up impulse, this past week YM triggered a bearish retrace (BR) of its down impulse. This BR is very close to the break-down level, which gives it higher than normal odds of holding. So the normal expectation is for some down movement, at least until the market can trigger and END support.

Daily Cycles

Daily Cycles

Turning to the Elliott Wave analysis, the preferred path lows still continue to hold on the NYSE Composite.  Price remained range bound for the duration of the week as buyers and sellers jockey for perceived trend direction.  A new development in the chart is the exit of price from the lower bound.  While this in itself is not an invalidation of the ending diagonal, it serves as a warning that buyers may not be willing to maintain the structure and a swift drop to the lower dotted cyan target path could take place.

NYSE Composite

NYSE Composite

Below is a zoomed in version of the current price action and the potential near term paths that we can take.  First is the dotted white  path structurally known in Elliott Wave as an expanded flat where the final leg returns near the point of origin of the correction start point before continuing on the impulsive path.  In this case down towards symmetry.  Path number two, the solid white path is known as a bear nest where bunching in trend takes place before a full release of the potential energy in the structure is unwound.  This particular structure has the potential to go far beyond the symmetry point towards lower Fibonacci targets.  Lastly is the cyan option which is known as an ending diagonal in Elliott Wave, or a falling wedge in traditional technical analysis.  While the paths vary greatly overall, the common theme between them is there should be at least one more low before the potential for a more sustained rally could ensue.  We will monitor this chart throughout the week in the Expert Lounge to see which path is tracking the best and what the potential outcomes for that path imply.

NYSE Composite Short Term

NYSE Composite Short Term

mcm Market Update For Week 39

Another week comes to a close and it seems that volatility is here to stay. All trading sessions had 20+ points from low to high, while the last 2 days had even 30+. Now that's a traders dream if he can be on the right side of the trades.

Coming back to the long term direction, last week didn't bring any significant change in the weekly cycles. The potential of a successful back-test of the 2105 break-out level is still in the cards. The market bounced from there but has yet to really take off which . YM continues to underperform and although it bounced, it barely got back above the break-out level. The directionality tool is still heading down which is also a sign that the back-test is not decided just yet.

Weekly Cycles

Weekly Cycles

The daily cycles had an important development last week as ES finally triggered a 3rd END resistance. That signals that the up impulse is now completed. That is a very important line in the sand going forward and the normal expectation is for downside to follow. However if the market manages to break above that level, against the odds, and turn this into a nested impulse up, then that would be very bullish and would signal a lot more upside to come.

Daily Cycles

Daily Cycles

While the week closed marginally higher, we still remain at a crossroads via our NYSE Elliot Wave count.  The rising support is key to maintaining the structures integrity.  Any sustained breach should be taken as a warning that the 'or 2' scenario could be in play in the alternated count and a dramatic decline could be just around the corner.  Seasonal expectations on the week are for more weakness which would imply overall chop assuming the rising support remains intact.  From everyone here at MCM we hope you all have a safe and profitable trading week.

NYSE

mcm Market Update For Week 38

The FED week was a good omen for the bulls and the market finally managed a small break-out above the choppy range in which it was stuck for a few weeks already. We had several short term cycles break into up impulses on mcm, which provided early clues about this ramp.

Coming back to the big picture, the weekly cycles show a dangerous development for bears. The back-test of the 2105 break-out level appears to have held. The market bounced from there and if it will continue to go higher that will be a situation in which shorts would have to be patient for quite a while. YM continues to underperform, however it bounced when it met the mcm-MA and now managed to get above the broken resistance also. The bears do have one more chance and that would be to reverse this bounce rather directly. The fact that the directionality tool is still heading down is also a sign that the back-test is not decided just yet.

Weekly Cycles

Weekly Cycles

The daily cycles are the reason why we are not fully in the bullish side just yet. They unwinded the big up impulses started back in March. YM completed that unwind (with a 3rd END resistance), while ES only had a 2nd END and could still (theoretically) get a 3rd END. In the mean time, they broke below support and actually started down impulses, although now the price came back above that support. So bears have 2 options here. One would be a direct reversal, which would mean the back-test of the previously broken support held and the down impulses are confirmed. That would be very bearish. The 2nd option is for the market to go higher and reverse after ES triggers the 3rd END resistance. As we can see on YM, that 3rd END doesn’t necessarily require a lot of upside to trigger. Once that happens, reaction to that resistance will be critical. If the bullish scenario on the weekly is to be confirmed the market could break into a nested impulse on the daily. But the normal expectation is for downside from there. As always, the shorter term cycles will provide early clues into which scenario will play out.

Daily Cycles

Daily Cycles

The Elliott Wave projection of the NYSE is also pointing to a crossroads with regards to market direction.  With minimum expectations of the structure being met, waves one and four overlapping, the market is free to do as it sees fit from here.  The duration of the fourth wave seems to be lacking taking into consideration that from a seasonal perspective, most bottoms aren't put in place till sometime on or after the second week of October.  While the projected paths are very insightful as far as targets and bias is concerned, the fact that markets don't go in a straight line as the projections do makes for a challenge.  Keeping that in mind, although we've bounced in what appears to be the final leg up to new all time highs, there is a very good potential this is just a counter trend move that has the potential to bottom at 'or 2' into the month of October.  Best to your trading this week.

NYSE Composite

NYSE Composite

MCM Newsletter – Outlook for Week 15 – 19 Aug

Executive Summary:
Main Trend (weekly): neutral
Intermediate Trend (daily): up
Short-Term Trend (480&288min): neutral
Details:
No real change on the weekly cycles, except the fact that the continued grind higher made the predictive pivot move higher. The up impulse on ES is still not confirmed, but if market holds up it could in the next 1-2 weeks. YM is still dragging on this and needs more time to (potentially) confirm. The action on the directionality tool is not very bullish with the lines becoming thick, but it doesn’t mean the market will turn immediately either. We have to look to the shorter time frame cycles for near-term clues.

Weekly Cycles

Weekly Cycles

On the daily cycles, both ES and YM managed to break above the resistance levels in the form of a 2nd END. It thus becomes very important to see if the market manages to stage a real break-out from here. Directionality bounced from the lowest level, however it is turning back down on ES, so it’s important to see what it will do next.

Daily Cycles

Daily Cycles

480 and 288min cycles show the plateau the market reached, after which it actually didn’t move much. 288 started a new impulse up and already began to unwind it, having an END resistance at last weeks’ highs, close to 2185. 480min actually managed to break over its 3rd END resistance and confirm a nested up impulse. Those 2 levels become very important for the near term since coming back below the break-out level on 480 would cancel that nested impulse and the bullish momentum, while breaking above the END resistance on 288, would mean more up movement is likely.

288&480min Cycles

288&480min Cycles

MCM Newsletter – Outlook for Week 1 – 5 Aug

Executive Summary:
Main Trend (weekly): neutral
Intermediate Trend (daily): up
Short-Term Trend (480&288min): up/neutral
Details:
The market basically did nothing but move sideways in a tight range, putting in a frustrating week. One interesting aspect to note is the fact that YM started to under-perform ES quite significantly. This can be seen also when looking at the potential break-out into an up impulse. The mcm-MA is close to confirming the up impulse on ES, but needs a lot more work on YM. Directionality continued to bounce, but didn’t make it to the max value yet, so going forward it will be important to see if it will. Another interesting aspect is the fact that the predictive pivot sits now very close to the resistance levels (highlighted on chart), which adds weight to the expectation that the market will come back to test that level. Reaction there will be critical to watch for confirmation or failure of the (potential) up impulse.

Weekly Cycles

Weekly Cycles

The daily cycles show even better the under-performance on YM. While ES moved flatish to up, whipsawing the 2nd END resistance, YM drifted down from there. The directionality tool also started to move down and watching to see if it makes it to the minimum level will provide clues as to whether we will get the normal expectation of down movement from resistances or the market will attempt to spike (or even break) through.

Daily Cycles

Daily Cycles

The 480 and 288min cycles show nicely the unusual action from the last 2 weeks. ES only moved between 2151 and 2171 and has chopped the nerves of both bulls and bears. The 288min finished it’s up impulse with a 3rd END and is now oscillating, having a recent resistance at 2168.25. 480min is in a nested impulse up, which already had a 1st END, a new support and now we are on the look-out for a 2nd END resistance, which is likely to point the direction back down. Interesting is that the directionality tool moved to the lowest level on 480min and stayed there despite the choppy bounces. On 288 it bounced only recently, so the next 1-2 days will be important to see if it gets to the max value (pointing up) or it will be a failed bounce (pointing down).

288&480min Cycles

288&480min Cycles

In conclusion, the cycles show that downside risk is more significant than upside risk. The market did break-out over the resistances on the weekly and if the up impulses are confirmed, that would need to be respected. However the daily cycles are in the unwind phase of the huge up impulse, having put in a 2nd END resistance. It is unlikely that after such a big run, the market will have enough energy left to push through the resistances for more than a brief spike, before a more significant pull-back. The 288 and 480min are also unwinding up impulses (288 is oscillating already), which points to the same conclusion: the market is dissipating the energy from this huge rally and looks more close to a top than an intermediary bottom. That being said, if the shorter time frame cycles 288/480min but also 60/135min (not shown) will break into fresh up impulses, that would be an early warning that the market is indeed trying to push upwards despite the odds.