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MCM Newsletter – Outlook for Week 25 – 29 July

Executive Summary:
Main Trend (weekly): neutral
Intermediate Trend (daily): up
Short-Term Trend (480&288min): up
Details:
The market continued the relentless up move, albeit at a slower pace. As mentioned last week a potential break-out and up impulse on the weekly cycles is now on the table, as price moved significantly above resistances. The direction in the next 1-2 weeks will be critical for confirmation (or not) of the up impulse. If the markets travel back down, the back-test of the resistance level became also very important to watch, as it is now support. The bounce started by the directionality tool continued and going forward it will be important to see if it gets to the maximum value or it will be a failed bounce.

Weekly Cycles

Weekly Cycles

Last week a significant development was registered on the daily cycles. A 2nd END resistance was triggered pointing to the continuing unwind of the up impulse. This 2nd phase of the unwind was unusually strong and as a result this sub-wave is a lot bigger than the 1st unwind (1st BR and END). The normal expectation now is for the market to correct until a new support level is triggered which will likely lead to another bounce to a 3rd END and complete unwind of the up impulse.

Daily Cycles

Daily Cycles

The 480 and 288min cycles are both in up impulses. 288 is already in the unwind phase, having had already an END and a following support, so a 2nd END could trigger soon. 480 is in a nested impulse which, even if it confirmed, never really broke out from the vicinity of the resistance, so it could still be reversed directly. It is interesting that the directionality tool on both fell and at the moment is bound at the minimum level which is usually a sign for weakness. Near term it will be important to see if it stays there or it bounces.

288&480min Cycles

288&480min Cycles

MCM Newsletter – Outlook for Week 18 – 22 July

Executive Summary:
Main Trend (weekly): neutral
Intermediate Trend (daily): up
Short-Term Trend (480&288min): up
Details:
The market continued to rally, making new all time highs and now both ES and YM moved above their weekly cycle resistance. The price traveled enough upwards to put the scenario of a potential break-out on the table. It doesn’t mean that this will happen, but it does mean that if the market travels back down, a back-test of the resistance level will be very important to watch, since it could act now support. The directionality tool never made it to the lowest point and started to bounce and its behavior is also important to watch going forward.

Weekly Cycles

Weekly Cycles

The daily cycles are still in the unwind phase of the up impulse. We were mentioning last week that the exact turning point and trigger of the 2nd END resistance has some room, however the market moved a lot higher which makes the form of this 2nd unwind less than ideal. Once the 2nd END triggers though, that would be an important line in the sand and potential turning point.

Daily Cycles

Daily Cycles

The 480 and 288min cycles show the relentless upward action in more detail. 288 is in an up impulse which still needs an unwind phase, while 480 unwinded its up impulse with an END resistance. That level was spiked above, however the market looks close to coming back down below it. Going forward the normal expectation is for some down movement, until support levels in the form of a bullish retrace (BR) will trigger (potentially on both). Those levels will be important to watch for reaction. The directionality tool is also important, with the one on 288 getting close to its lowest level. Behavior there will be telling for the near term direction.

288&480min Cycles

288&480min Cycles

MCM Newsletter – Outlook for Week 11 – 15 July

Executive Summary:
Main Trend (weekly): neutral
- Intermediate Trend (daily): up
Short-Term Trend (480&288min): up
Details:
As we were mentioning previously, on the weekly cycles we had 2 consecutive LRE (lower risk entry) for longs which the market respected, rallying strongly. The resistance levels are currently being tested, with ES managing to spike above once again, while YM stopped exactly at that level. The directionality tool kept moving down however some of its components started to bounce. The normal expectation is unchanged, namely for the resistances levels to hold and the market to have a bigger correction from this general area. The structure of the daily cycles adds weight to this assumption, however with the market testing the ATHs, next week looks decisive for a decision to be made one way or another.

Weekly Cycles

Weekly Cycles

The daily cycles are continuing to unwind the up impulse. After the Brexit vote, the market spiked below the 2nd BR (bullish retrace) support, however the market rallied strongly from there and made a higher high vs the day before the vote. From a cycle perspective the price is in an area in which a 2nd END resistance could trigger basically at any time. Once that happens, that could mark the end of the impulse, which is suggesting that the up-driving energy is close to fully dissipating. That is not favorable to continuing upside, although the exact turning point has a bit of room. The shorter term cycles should provide early clues for that.

Daily Cycles

Daily Cycles

The 480 and 288min cycles show a “zoomed-in” version of the post Brexit action. After marking the first low with an END and 2nd END support and having those supports spiked below by the lower low, the ensuing rally was very powerful. Resistances were triggered, but unable to contain the rally and both started impulses up. 288min reversed that impulse up and triggered a 3rd END support lower, then another resistance higher, which was broken as well by the relentless upside. 480 managed to keep its initial up impulse intact and triggered an BR (bullish retrace). The next important level to watch would be an END resistance on 480, which would likely mark the unwind of the up impulse.

288&480min Cycles

288&480min Cycles

MCM Newsletter – Outlook for Week 4 – 8 July

Executive Summary:
Main Trend (weekly): neutral
Intermediate Trend (daily): up
Short-Term Trend (480&288min): down
Details:
On the weekly cycles, the market made a low below the “Brexit low” which was greeted by a new LRE (lower risk entry) for longs. After that the market rallied, giving credit to the 2 consecutive LREs, and is now close to testing the resistance level once more. The directionality tool keeps moving down and the action next week looks critical to see if it will bounce back up or continue its slide (which would be bearish).

Weekly Cycles

Weekly Cycles

The daily cycles show nicely the huge 4 day rally following the lower low registered on the next day following the Brexit vote. The market bounce right back through the broken support and bounced enough to an area where it’s possible already for a 2nd END resistance to trigger. That doesn't mean the market cannot go higher though. It’s interesting that the mcm-MA on YM changed color and a LRE for shorts was triggered on Thursday.

Daily Cycles

Daily Cycles

As anticipated last week, the 480 and 288min cycles spiked below their END support levels before the market came back and rallied strongly. The big rally triggered new resistance levels at 2075 ES, which were broken and 288 is now close to confirm its up impulse. If this breakout turns into a real impulse on both and if the impulse holds any back-test, then the bounce could go significantly higher. The next 1-2 trading days appear to be key for that, especially considering the directionality tool which is at its maximum value and if it turns, it would be a clue the bounce is done. The even shorter time-frame cycles like 60&135min or even 5&15min will also be important to watch for early clues about a potential turn or further break-out.

288&480min Cycles

288&480min Cycles

MCM Newsletter – Outlook for Week 27 June – 1 July

Executive Summary:
Main Trend (weekly): neutral
- Intermediate Trend (daily): up
Short-Term Trend (480&288min): down
Details:
On the weekly cycles, the market re-tested the resistance levels once more before being denied with authority. Again the resistance held cleanly on YM and was spiked briefly on ES. The directionality tool (white lines at the bottom of the charts) finally started to move down on both indexes which is a serious warning that the trend is changing. We did get a LRE (lower risk entry) for longs at the lows from Friday which shows that at least short term the market is oversold, so a near term bounce would not be totally unreasonable to expect. We need to be aware however that due to the large move, the market could drop further (and quite significantly) before the bounce (as it happened on the previous LREs for longs triggered on ES - highlighted on the chart).

Weekly Cycles

Weekly Cycles

The daily cycles provided again a nice “zoom-in” into the weekly cycles. The bounce from the 2nd support triggered (which corresponded with the test of the mcm-MA on the weekly) was very strong and already reached an area where a 2nd END resistance could trigger (at the highs of last week). The Brexit vote was the main news behind the huge daily bar from Friday which spiked directly through support and triggered a LRE for longs at the low (same like weekly). The price is still below the support level and it is important to see how the market will behave when (or if) it will come back to test it. If the market comes back above it and we do not get a 2nd END resistance trigger at the previous highs, then a bigger bounce might ensue. If it cannot come back above, that could have very bearish consequences since it could be the start of an impulse down.

Daily Cycles

Daily Cycles

The 480 and 288min cycles were in down impulses and they attempted to reverse them by breaking above the resistances triggered in the form of a bearish retrace (BR) on 480min and a 2nd BR on 288. The up impulses never confirmed (mcm-MA never broke above the break-out level) as the market reversed strongly on the Brexit news and found a bottom marked by support and a LRE for longs on both cycles. The bounce from there touched the mcm-MA on 480 and spiked it a bit on 288 before reversing. Where this down move ends will be telling for the near term direction and the support levels area is key to watch. The current move is close to qualify already as a back-test of the support levels, however the market could test them better and even make a new low by spiking below.

480&288min Cycles

480&288min Cycles

MCM Newsletter – Outlook for Week 20 – 25 Jun

Executive Summary:
Main Trend (weekly): neutral
Intermediate Trend (daily): up
Short-Term Trend (480&288min): down
Details:
On the weekly cycles, in line with the normal expectation, the resistance level held (cleanly on YM and after a brief spike above on ES) and the market moved again lower from there. Once more the price met the mcm-MA on the way down, which provided a bit of support. Interesting is that the directionality tool on YM already started to move down and on ES not yet (highlighted on chart), which is not surprising considering that YM is underperforming quite significantly. The normal expectation about a more significant correction from this general area is unchanged, however for early clues about when the actual turn happens, we have to look at the shorter term cycles.

Weekly Cycles

Weekly Cycles

The daily cycles captured nicely the move above the resistances on weekly, by having resistance in the form of an END coming up on daily too. Both YM and ES spiked here above the ENDs before being reversed with authority. A significant development was registered last week, as the retreat from the highs triggered a 2nd support level which normally needs a 2nd END resistance higher. It is interesting that, given the underperformance on YM, the support level there was triggered lower than the initial one, while on ES triggered higher (shown on chart). Considering that, we don't expect the 2nd END to be significantly higher than the 1st END, if we will get one. If the market breaks significantly below the support level that would be very bearish since it could signal the start of an impulse down (that is not the normal expectation however). Near term, the initial bounce from support was sold, so it remains to be seen if the price will back-test the support again or will go directly higher.

Daily Cycles

Daily Cycles

As mentioned last week the 480 and 288min cycles were close to confirming the down impulses. They did, held also an attempted the back-test which stopped at the mcm-MA (shown on chart) and the market moved further down from there. The impulses are now firmly established so the normal expectation is for them to unwind in a regular fashion with at least one bearish retrace (BR) and corresponding END.

480&288min Cycles

480&288min Cycles

MCM Newsletter – Outlook for Week 13 – 17 Jun

Executive Summary:
Main Trend (weekly): neutral
Intermediate Trend (daily): up
Short-Term Trend (480&288min): neutral
Details:
On the weekly cycles, as warned about the possibility in the previous newsletter, the market tried to get above the exact level of resistance, at least on ES. It is interesting that YM is under-performing quite noticeably and never made it to the resistance level, while ES managed to overcome it slightly. The long term view is unchanged and the expectation is for the resistance level to hold and the market to register a more significant correction from this general area. Where exactly the market will finish running the stops is difficult to pin-point exactly and the shorter term cycles should provide better early clues in this regard. The directionality tool is still close to maximum levels and would need to start moving down to confirm a turn.

Weekly Cycles

Weekly Cycles

The daily cycles show better the brief move above resistance and here the YM moved in sync with ES, although it’s under-performing vs the previous end of April high. The directionality tool started to move down on both ES and YM and its behavior going forward will be telling for if this is a more significant turn or not. The mcm-MA could provide some near term support, together with the new LRE (lower risk entry) for longs which triggered on YM on Friday. On a bigger picture level we expect the up impulse to either be finished or to require another BR and a 2nd END. For another BR support to trigger more downside will be needed though.

Daily Cycles

Daily Cycles

The 480 and 288min cycles provided early clues about the turn. 480 had previously unwinded an up impulse with a BR and an END resistance in the same area as the weekly and daily resistances. 288 also had resistance trigger there. The market attempted to break-out over those resistances, however failed to sustain momentum and 480min never confirmed the nested impulse. The directionality tool moving lower also warned that the break-out was likely a head-fake and that the up momentum was not sustained. After coming back below resistances, both cycles then triggered support levels which were broken and are now very close to confirm the down impulses. If they will confirm and hold a back-test, that would warn of a bigger correction.

480&288min Cycles

480&288min Cycles

Note: please be aware that the price on the charts has been corrected with the roll-over of the ES and YM contracts from June to September.

MCM Newsletter – Outlook for Week 30 May – 3 Jun

Executive Summary:
Main Trend (weekly): neutral
Intermediate Trend (daily): up
Short-Term Trend (480&288min): up/neutral
Details:
The initial decline from the triggered resistance level on the weekly cycles has stopped when it tested the mcm-MA and the market managed to bounce from there. Now, price is close enough to the resistance level to be considered a back-test (highlighted on chart). What happens here will be key for the main trend direction, with the normal expectation being for resistance to hold and market to have a more pronounced correction. As it can be seen from the previous resistance levels, it would not be totally unexpected for the market to either head directly lower or challenge the resistance a bit more before that. The directionality tool should be watched closely for signs of down movement as well. Interesting is that YM is underperforming ES, being about 200 points below the resistance level, while ES is only 7 points.

Weekly Cycles

Weekly Cycles

On the daily cycles, we can see that the mcm-MA on the weekly also had help from the daily when it held. Namely, the market back-tested the bullish retrace (BR) support which had triggered a while back. That back-test showed that not all is as bullish as everyone thinks since the support held with difficulty and was spiked below. However it did hold in the end and market bounced strongly from there. Now an END resistance to that BR could trigger basically any time at these levels. It can also be seen even better than on the weekly cycles how significant is the YM underperformance - while ES went clearly above the previous high, YM did not and is in that general area. The mcm-MA on YM also turned red and we started to get some LRE (lower risk entries) for shorts. As previously said, once that END triggers, that would signal a possible unwind of the up impulse and in the context of the weekly, a larger down move would be expected. There is also the option that a 2nd BR will trigger and require a 2nd END, which would need more back and forth movement before the bigger correction.

Daily Cycles

Daily Cycles

The 480 and 288min cycles show the effect of the big move we had in the past 4 days. 480min actually broke into an up impulse, while 288 had a larger regular wave which triggered resistance at 2092.75. Considering the up impulse on 480, if the market sustains the move past this level and starts an impulse also on the 288min cycle, then we would have to acknowledge that the bounce would have further to run. However, the resistance on 288 might still hold, despite of it having been spiked briefly, so keeping an eye on that level in the next few trading sessions is important.

288&480min Cycles

288&480min Cycles

MCM Newsletter – Outlook for Week 23 – 27 May

Executive Summary:
Main Trend (weekly): neutral
Intermediate Trend (daily): up
Short-Term Trend (480&288min): neutral
Details:
The weekly cycles continued to move slightly downward from the resistance level. As mentioned a while back, the mcm-MA provided some support and the market failed to break below it so far. Also a historically relevant level was tested last week and held (highlighted on the chart). The directionality tool is still at the highest level and it would be important to see when it starts moving lower. So far it looks still open whether the market will be able to back-test the resistance level again or if it will accelerate down.

Weekly Cycles

Weekly Cycles

On the daily cycles, the unwind of the up impulse is continuing. After failing to sustain the initial bounce off the bullish retrace (BR) support, the market back-tested that level again, came slightly below it and recovered it once more. Although the support level may still hold and this bounce could continue until an END resistance is triggered higher, the fact that the price came below the support level shows the market is no longer full-on bullish. That also means that the END could come after a weaker bounce than usual.

Daily Cycles

Daily Cycles

The 480 and 288min cycles continued to whipsaw their support and resistance levels, showing the emotional behavior of the market. The last level triggered was support on both, which appears to be holding after being spiked below in a few instances. As the predictive pivot is also higher, the normal expectation is for the bounce to continue until a resistance level is triggered. How the market behaves there will be important for the near term.

288&480min Cycles

288&480min Cycles

In conclusion, it seems the market is staying true to the saying a top is a process not an event. The 288&480min cycles did not break into real impulses just yet (although 480 had an impulse down unwind, that had more a sideways form rather then being truly impulsive). The BR support on the daily still attempts to hold and is the key line in the sand for downside movement, while the resistance on weekly is key for upside movement.

MCM Newsletter – Outlook for Week 16 – 20 May

Executive Summary:
Main Trend (weekly): neutral
Intermediate Trend (daily): up
Short-Term Trend (480&288min): neutral

Details:
No real change in the weekly cycles. They are still oscillating, which means the main trend is neutral. However, as previously mentioned, the fact that resistance has triggered shifts the normal expectation to down movement until a new support level is found. The directionality tool did not move down yet, so a re-test of resistance is still not out of the question before a larger correction. The mcm-MA also provided support, as the market came into its area. As it can be seen from the history, the market couldn't break below the mcm-MA easily, so paying attention to the level indicated by it is important.

Weekly Cycles

Weekly Cycles

On the daily cycles, the unwind of the up impulse is continuing. The bullish retrace (BR) support provided an initial bounce, but the market could not sustain the up movement and came back down and is now back-testing that level again. Those levels are key. The market could regain some composure and bounce to put in an END resistance and a proper unwind of the impulse, like it did on a previous instance (highlighted on the chart). Or, it could break through the support level directly, without triggering an END. That would be quite bearish since it could be an attempt at an impulse down. The next few days will be key as to which option will play out.

Daily Cycles

Daily Cycles

The 480 and 288min cycles both attempted up impulses, by breaking above their resistances triggered, however these were reversed (highligthed on the charts). 288 triggered a support level quite quickly after coming below the break-out level and has in the mean time broken below it, with the impulse down looking to confirm most likely in the next trading day, if the weakness continues (by having the mcm-MA also moving below the broken support level). 480min triggered a support level which confirmed right at the lows from Friday. That points to a bounce being the normal expectation. However if the support on 480 will also be broken, then the picture would become very bearish, since true impulses down on 480 and 288min would likely travel quite far and the daily cycles would also start impulsing down in the mean time.

288 & 480min Cycles

288 & 480min Cycles

In conclusion, we maintain our view that the market may have registered an important high at the level indicated by the resistance on the weekly cycles. Near term it is again make or break time for the markets. The support level on the daily cycles is under pressure again and the next few days are key to see if they will hold once more and produce another bounce or not.