Last week we had fireworks again, with the first 3 days being very bearish, while Thu-Fri provided a vertical V-shape rebound, with up gaps on the cash sessions on both days.
There were quite a lot of great tells from the mcm tools, so let's dive right into the "lessons learned".
- IGSI unconfirmed low set-up
Unconfirmed lows on IGSI are very powerful set-ups and are normally good for a lot of points. A great example is the actual move off the Thursday morning low, which was unconfirmed on IGSI. However we actually had 2 unconfirmed lows set-ups, the first of which failed. Let's see the main differences between the two.
On Tuesday we had an unconfirmed low on IGSI, but the initial bounce off that low triggered bearish EE which held and pushed price lower. The unconfirmed low was held initially, but the bounce off there triggered again a bearish EE which also held. The next trip lower broke decisively the unconfirmed low and the market flushed.
On Thursday we again had an unconfirmed low on IGSI, but this time, buyers never hesitated and rocketed off there.
The main take-away is that the confirmation lvl for the upside set-up of the unconfirmed low on IGSI is the peak of the prior IGSI high before the unconfirmed low. If IGSI shows bearish EE vs that lvl, it is best to be cautious and raise stops on positions entered at the unconfirmed low.
2. FGSI up squeeze set-up
Normally when FGSI is at extreme optimism (red zone) it indicates a top and reversal is close. However the "up squeeze" set up happens when FGSI is in the red zone and starts pulling back, while price keeps hovering near the highs or even makes new highs. That indicates that market participants are increasingly pessimistic, but are unable to move prices lower. Ideally this sort of set up is completed by a breakout on Tick Tools (TT), like a breakout over a buyer exhaustion (BE) or an important level, like the maginot line (ML).
We had also 2 up squeeze set ups on FGSI last week, one failing and one playing out well.
The 1st one occured on Thursday. After the big bounce off the unconfirmed low on both FGSI and IGSI, FGSI reached extreme optimism (red zone). But price continued higher, as FGSI started to come lower from there. On TT we had broken out a BE just after the cash open and everything was looking good for the up squeeze set-up. TT even triggered a Seller exhaustion (SE) above the broken BE, but the big warning came immediately after that when a new BE was triggered. That turned out to mark the high for the day and the market retreated quite strongly from that level.
The 2nd one occured on Friday and this time there was no stopping the buying stampede. We had almost the exact set-up. FGSI moved to the red zone, then started pulling back, while price kept climbing. TT had broken a very strong 100% BE Xtick and held the back-test. Then came a SE above the broken BE Xtick (so far exactly like the set-up from Thursday), but this time no BE triggered and the coast was clear for buyers to continue higher. This is exactly what happened as price grinding higher for almost the entire session, with only the last 1h sesing a few whipsaws both down and up, and closed near the highs of the day.
The main take-aways is - the up squeeze on FGSI is a powerful set-up, but must be completed with signals from TT. If a BE hits that caps price and then a SE gets broken, those are strong signals the buyers are not in control any more. If TT signals that the up trend has little resistance, then the up grind can continue unabated for quite a bit. As can be seen, an additional confirmation on Friday was that price held the danny line all the way until the last 1h whipsaw. That is indicative of a strong up trend.
mcm daily market update 9.Jul.21
/in Charts /by mcm-AlexST trend: up
Yesterday we were noting that the trend was down, but with a potential bottoming attempt as FGSI was showing unconfirmed lows. Turns out the actual low was a few points away on yet another unconfirmed low on FGSI, then market bounced again very strongly from there. However, differently than in the other situations in the last 2 weeks, the bounce was stopped by ML which held as resistance.
The o/n came to the buyers' rescue and after a sideways action both up and down, there was yet another strong bounce which did manage to break back above ML. Now, as I have been repeating like a broken record - ML is key for the near term trend. Buyers winning back ML is a strong statement they are trying to get back in the lead. FGSI is showing an unconfirmed high at the o/n high and market pulled back from there to test ML once more. That triggered a pretty large bullish EE, so now this is where it gets decided. ML is the big inflection point going into today. If buyers manage to defend it and bounce, then the trend is back to up and we could be getting back to the usual up grind. Especially if they can turn the unconfirmed high on FGSI to a confirmed high. However, if price breaks back below ML then that would signal more bearishness ahead.
mcm daily market update 8.Jul.21
/in Charts, Public /by mcm-AlexST trend: down (with potential bottoming attempt)
Yesterday we were noting that the ST trend was up, as buyers stepped up and held a bullish EE set up on FGSI and broke a bearish EE one. We did get a bigger head-fake drop after the cash market open, which broke below ML, but that break was again bought right back up. Price broke a BE which triggered right below ML and danny, so once that triple resistance couldn't contain the bounce it was clear that buyers had regained control. Market proceeded then to make new ATHs after that.
The o/n today brings a nasty surprise for buyers. The new ATHs were sold strongly. The market dripped initially back towards another ML test and FGSI showed big bullish EE vs yesterday's low. However what happened next on FGSI was key. Buyers were very inefficient on the bounce off ML and FGSI moved back above the center line with almost no price movement. That was the key signal that something is wrong with the up trend and once ML was broken down there was no looking back. Danny capped price action the whole way down and even if FGSI bottomed in the extreme pessimism zone the market continued to move lower. Right now we do have extreme pessimism on IGSI and FGSI, with FGSI showing an unconfirmed low. So that puts a potential bottoming attempt on the table. However as long as danny (and momentum line) keep capping price action, the market can continue to make new lows. Danny is key in the ST for an attempted bounce.
mcm daily market update 7.Jul.21
/in Charts, Public /by mcm-AlexST trend: up
Yesterday we were noting that the ST trend was neutral, but the set up was there for a bigger correction. ML did give way and we did get a decent decline, until the market found a bottom at an unconfirmed low on FGSI (alerted in real time in the mcm chat room). Buyers stepped in strongly there and after breaking an important emotional area with 3 exhaustions (2 BEs and 1 SE), they pushed price directly to ML and broke back above.
The o/n saw a bit of consolidation after the big bounce off yesterday's LOD and for a while the trend was neutral, as both sides were inefficient via FGSI and we had both bullish and bearish EE setting up. However it was again buyers who took the lead, they held the bullish EE and broke through the initial bearish EE level. ML continues to move higher (pushed by price) and is the key for the trend. As long as buyers can keep price above, the trend is (back to) up. Losing ML would be a serious warning that we might get another attempt at more downside, but at the moment yesterday's LOD looks like the end of the near-term correction.
mcm daily market update 06.Jul.21
/in Charts, Public /by mcm-AlexST trend: neutral (with bigger correction potential)
On Friday we were noting that the trend was still up, as ML continued to hold and FGSI continued to paint confirmed highs. That pointed to the usual upward bias going into a long w/e will play out and indeed it has, with the market finishing with a new ATH.
However the up squeeze from the 2nd part of the cash session triggered a bearish pattern in FGSI, namely a 45 degree angle divergence. When these large divergences between FGSI and price happen, they are normally bearish as they indicate determined selling so basically distribution as the price goes up. This type of pattern was followed text-book until now, as price retested the divergent high and was rejected there. Now buyers look inefficient via FGSI. We also have additional warning signs. On the retest of the high (which actually made a minor new high), we had large unconfirmed highs on IGSI, MGSI and also FGSI showed an unconfirmed local high. All pointing to the POTENTIAL for a bigger turn. ML is being tested now and as usual, it is the key for the near term trend. If sellers break below ML, that would be a big warning that the 45 degree angle divergence on FGSI is indeed playing out (pointing to a larger decline). Buyers would need to best the o/n highs and run a bit further to cancel the bearish potential. Right now this looks like lower odds though.
Lessons learned part 4
/in Charts /by mcm-AlexThe past week (21-25th of June) we had a very strong week and a powerful melt-up off Sunday's OPEX lows. Those lows were announced on Monday in the am on the daily blog post with the mention "This set up has the potential to mark an important bottom and trigger an explosive bounce". That came to pass and the market relentlessly pushed higher, with only small pullbacks. Because the short term GSIs (Globex Sentiment Indexes) caught that potential, it is time to look more closely at these kinds of set-ups and see what provides confirmation or non-confirmation.
First, let's look at FGSI, which because it's the fastest will usually trigger the set-up first and will also be the 1st one to confirm. The chart below was the one posted on the blog on Monday, June 21st. As we can see we had a large unconfirmed low, the market rallied right into a bearish EE (excess energy) level, hesitated briefly, then broke through it. That was the confirmation that the unconfirmed low would hold and it is a bullish breakout from there (roughly 4154ish).
Now let's have a closer look at an earlier set-up of an unconfirmed low, which failed, namely the Friday morning low. We had a pretty large unconfirmed low (although the set up was not as ideal as the one from Sunday, as the lows were too close to each other, not to mention the IGSI and MGSI set-ups). And then the ensuing bounce was showing that buyers are inefficient, as price barely bounced 20 points off the lows, but FGSI was already above the centerline and triggered a very large class B bearish EE vs the last time FGSI was in that area. Price then whipsawed from that area back towards the unconfirmed low where buyers made another attempt to stick save that low (where the green arrow points). The bounce triggered a bearish EE which held and then the breakdown happened.
So the main lesson here is - whenever we have an unconfirmed low (or high), that shows the potential for a larger turn. But the key to that potential playing out is how price acts when we have an EE set-up after that. Breakout/down of that EE set up is the confirmation that a larger turn is playing out.
mcm daily market update 18.Jun.21
/in Charts, Public /by mcm-AlexST trend: down, with potential bounce attempt
Yesterday we were noting that the ST trend was neutral as both sides were inefficient, as shown by FGSI (something which is happening quite often in the o/n as of late). The market had a big pop prior to the open, then a few whipsaws before finally dropping hard to retest Wednesday's lows before rallying hard into the close and retest the highs of the day.
The o/n now saw the market moving sideways and then starting to drift lower. FGSI is showing extreme pessimism already, so a bounce might be attempted, but it it also showing confirmed local lows, so the decline might extend. We have a bullish EE lvl vs yesterday's LOD, so that levels becomes important if we do in fact accelerate lower. The biggest problem for buyers is the fact that they lost ML, then tried to win it back but failed.
mcm daily market update 16.Jun.21
/in Charts, Public /by mcm-AlexST trend: neutral
Yesterday we were noting that the trend was up, but with a potential reversal pattern, as all GSIs were showing unconfirmed highs at the o/n high. That did prove to be a bad omen for buyers and the market proceeded to then retrace the entire rocket launch move from Monday's last 2 hours cash session.
At LOD we did get an unconfirmed low on FGSI and market tried to bounce, but this time the bounce failed to get above ML, which is a clear indication that the buyers are losing control of the ST trend.
In the o/n session we had only a sideways movement with whipsaws in a tight range. FGSI is showing that both buyers and sellers are inefficient, as small price movements trigger big swings in FGSI. One thing that gives the sellers an edge is ML and the fact that it rejected price action yesterday but also in the o/n. ML continues to be the key for the near term trend, so if buyers want to stage a bigger bounce from here they must break above ML. Today is the conculsion of the FED 2 day meeting, so prices might stall and continue to sideways chop from the o/n until after the FED announcement and then stage a larger move.
Lessons learned part 3
/in Chart-Intraday, Commentary, Public, Uncategorized /by mcm-AlexLast week we had fireworks again, with the first 3 days being very bearish, while Thu-Fri provided a vertical V-shape rebound, with up gaps on the cash sessions on both days.
There were quite a lot of great tells from the mcm tools, so let's dive right into the "lessons learned".
Unconfirmed lows on IGSI are very powerful set-ups and are normally good for a lot of points. A great example is the actual move off the Thursday morning low, which was unconfirmed on IGSI. However we actually had 2 unconfirmed lows set-ups, the first of which failed. Let's see the main differences between the two.
On Tuesday we had an unconfirmed low on IGSI, but the initial bounce off that low triggered bearish EE which held and pushed price lower. The unconfirmed low was held initially, but the bounce off there triggered again a bearish EE which also held. The next trip lower broke decisively the unconfirmed low and the market flushed.
On Thursday we again had an unconfirmed low on IGSI, but this time, buyers never hesitated and rocketed off there.
The main take-away is that the confirmation lvl for the upside set-up of the unconfirmed low on IGSI is the peak of the prior IGSI high before the unconfirmed low. If IGSI shows bearish EE vs that lvl, it is best to be cautious and raise stops on positions entered at the unconfirmed low.
2. FGSI up squeeze set-up
Normally when FGSI is at extreme optimism (red zone) it indicates a top and reversal is close. However the "up squeeze" set up happens when FGSI is in the red zone and starts pulling back, while price keeps hovering near the highs or even makes new highs. That indicates that market participants are increasingly pessimistic, but are unable to move prices lower. Ideally this sort of set up is completed by a breakout on Tick Tools (TT), like a breakout over a buyer exhaustion (BE) or an important level, like the maginot line (ML).
We had also 2 up squeeze set ups on FGSI last week, one failing and one playing out well.
The 1st one occured on Thursday. After the big bounce off the unconfirmed low on both FGSI and IGSI, FGSI reached extreme optimism (red zone). But price continued higher, as FGSI started to come lower from there. On TT we had broken out a BE just after the cash open and everything was looking good for the up squeeze set-up. TT even triggered a Seller exhaustion (SE) above the broken BE, but the big warning came immediately after that when a new BE was triggered. That turned out to mark the high for the day and the market retreated quite strongly from that level.
The 2nd one occured on Friday and this time there was no stopping the buying stampede. We had almost the exact set-up. FGSI moved to the red zone, then started pulling back, while price kept climbing. TT had broken a very strong 100% BE Xtick and held the back-test. Then came a SE above the broken BE Xtick (so far exactly like the set-up from Thursday), but this time no BE triggered and the coast was clear for buyers to continue higher. This is exactly what happened as price grinding higher for almost the entire session, with only the last 1h sesing a few whipsaws both down and up, and closed near the highs of the day.
The main take-aways is - the up squeeze on FGSI is a powerful set-up, but must be completed with signals from TT. If a BE hits that caps price and then a SE gets broken, those are strong signals the buyers are not in control any more. If TT signals that the up trend has little resistance, then the up grind can continue unabated for quite a bit. As can be seen, an additional confirmation on Friday was that price held the danny line all the way until the last 1h whipsaw. That is indicative of a strong up trend.
mcm daily market update 24.Mar.21
/in Charts /by mcm-AlexST trend: neutral
Yesterday we were noting that the ST trend was down, as buyers were showing large inefficiency on bounces and FGSI never touched the extreme pessimism (green) zone. That happened close to 6am and FGSI then had an unconfirmed low, which pointed to a potential ST bottom. From there the market ran back towards 3940, with FGSI getting close to extreme optimism, before failing and breaking down to new lows.
The o/n continued to be worrying for buyers, as the price action was more sideways, but FGSI had big spikes to the upside showing they are still very inefficient. However on the last dip, sellers were also inefficient and actually triggered a bullish EE vs the prior low, which held. That puts things in the neutral zone, as both sides are inefficient and trigger bullish and bearish EE on bounces/declines. Once one of those EEs gets broken, that will be a sign that one side is taking the lead.
ML is also a big line in the sand and if price holds above or below will also be important to see. Currently the buyers are attempting a breakout over ML, will be improtant to see if they can hold above.
mcm daily market update 15.Mar.21
/in /by mcm-AlexST trend: up (with potential pullback risk)
On Friday we were noting that the trend was down with a potential bottoming attempt and indeed the market found its footing in the morning and then grinded up throughout the day. It continued higher on Sunday, but then retreated after touching the area close to the ATH.
This morning, price touched again the Maginot Line (ML) on the pullback and we had an unconfirmed low on FGSI, from where the market bounced hard and is now close to the ATHs again. That makes the ST trend up, however FGSI is at extreme optimism, so its behavior needs to be monitored to see if we get further up squeeze or a pullback to allow it to "cool off".