Intermarket structural analysis research
Stock chart courtesy of StockCharts.com.
Intermarket Futures trading data and daily calculations indicate a decline is expected and there is a 30% chance that the January 4, 2022 to February 14, 2022 Dow structure is in the process of repeating the October 3, 2018 to December 4, 2018 structure, as shown above.
Daily engrbytrade™ Dow calculations and Market Maker block trades indicate algorithms will initiate a limited decline similar to what occurred between December 16, 2021 and December 20, 2021. This decline is expected to move the Dow down to 34,081 (+/- 0.5%). It will also fill a gap in the 5 minute futures chart created on January 28, 2022.
On January 24, 2022, it was reported that global stock selloff losses were near $3 trillion. It should be noted that part of this stock (inventory) moved from institutional customers, such as pension funds and large trading firms, to the accounts of NYSE Designated Market Makers (DMM) and Supplemental Liquidity Providing Firms (SLP-Prop / SLMM). In the coming weeks part of the inventory accumulated by the DMM and SLP firms will be sold to corporations who are initiating corporate buyback programs. This buyback process will run until March 14, 2022. As corporate buyback programs progress, DMMs and SLP firms will raise prices of their inventory and institutions, large trading firms, retail investors, etc., will start buying. When DMMs and SLP inventories are depleted they have the option to sell short. During the next decline DMMs and SLP firms will cover their short positions while buying stock (inventory) from institutions and large trading firms at a lower price. This process of inventory control was explained in Richard Ney’s books published between 1970 and 1975. The following document provides some insight to the process as well. On page 10 it states that Market Makers must track their inventory to ensure they are not taking undue risk or encroaching on capital limits.
Chart courtesy of StockCharts.com.
Between July 19, 2021 and January 24, 2022 Market Makers created a small scale version of the broadening formation developed between April 2, 2018 and March 23, 2020. Based Market Maker’s accumulation of very large blocks between January 24, 2022 and January 28, 2022 the current 2021-2022 broadening formation structure indicates a move toward the 38,000 range is in progress.
Today, the Dow opened at 35,520.08 creating a gap with the previous day’s close. This is similar to what occurred on Monday, January 18, 2022 when a gap in the Dow was created with an opening of 35,661.76. Prior to the markets opening on the morning of January 18th a gap in the overnight 5 minute futures chart was also created between 35,671.00 and 35,659.00 and has not been filled. It is expected that the Dow will fill the futures market gap created on January 18, 2022 and the gap created today prior to moving lower.
Daily engrbytrade™ Dow calculations indicate the retracement from January 25, 2022 to February 2, 2022 has hit a limit similar to what occurred between December 2, 2021 and December 7, 2021. With Market Makers managing very large block trades after the close, a decline to 34,214 is expected by February 16, 2022. If there is a sharp decline in the 10-Yr Note rate as the Dow declines, this is an indication that Exchange Insiders are anticipating a significant decline in the Dow.
Not a surprise that Tom Lee agrees on a rally in February. Bitcoin is still expected to continue trending lower this year with a move similar to that of the Euro in 1980.
A violent rally in February? @fundstrat's Tom Lee joins 'Fast Money' to give his forecast for the market and bitcoin after the bumpy January. $BTC pic.twitter.com/L4XrJmpqT6
— CNBC's Fast Money (@CNBCFastMoney) January 31, 2022
Futures trading data for this week now shows futures traders are taking advantage of the Dow being undervalued relative to the U.S. Dollar and are making preparations for the Dow to move upward. Calculations indicate a structure will be completed in a very short period of time that is similar to what was developed between February 12, 2018 and October 3, 2018. With the participation of futures traders and Market Makers, a move to 38,000 is achievable. This will complete the 1929 model.
Stock chart courtesy of StockCharts.com.
In addition to generating structures similar to what was developed between December 1, 2021 and December 2, 2021 volatility has provided Market Makers with an opportunity. The daily Dow futures candlestick chart indicates a repeat performance of October 1, 2021 to October 6, 2021. On January 25, 2022 it was observed that a significant number of very large blocks crossed the tape indicating an accumulation process was underway. Based on accumulation, volatility and price movement calculations it appears Market Makers are in the process of developing a structure similar to that of October 6, 2021 to November 8, 2021. Preliminary structural calculations show the Dow moving to 37,977 (+/- 1%) by March of 2022.
Between 11:20 a.m. (EST) on January 21, 2022 and 4:00 p.m. (EST) on January 24, 2022 computer algorithms generated a 5 minute futures chart structure that is similar to, and 65.5% larger than, what was generated between 11:15 a.m. (EST) on December 1, 2021 and 4:00 p.m. (EST) on December 2, 2021. Daily engrbytrade™ Dow calculations currently indicate the Dow is expected to move to 35,883 (+/- 1%) before February 9, 2022 with the continuation of computer generated algorithms that are similar in structure to what was generated between December 2, 2021 and December 16, 2021.
Based on volume and volatility calculations over the last five months, a potential exists for the Dow to decline 1.5% on Monday, January 24, 2022, before moving higher.
Friday’s update to intermarket currency futures trading data indicates the Dow is recreating a move similar to what occurred between October 3, 2018 and October 11, 2018. A retracement is expected with a move up to 35,271 (+/-1%). It appears a long term decline has been initiated.
It should be noted that a futures gap created on December 1, 2021 exists in the 5 minute chart between 34058.00 and 34065.00. There is a 50% chance that trading algorithms and/or futures traders will try to fill this gap prior to moving higher.
Daily engrbytrade™ Dow calculations at the close of trading on January 20, 2022 show the Dow is in a similar position to where it was on December 1, 2021. Block trading was focused in the technology sector. A move above the previous high of 36952 is expected by March, 2022.
Stock chart courtesy of StockCharts.com.
While algorithms continue to repeat, the current rising wedge indicates a move upward will be limited. Based on futures trading structures a solid decline through the lower trend line is expected by February 9, 2022 (+/- 1 trading day). Revised calculations indicate intraday volatility will remain elevated as the Dow moves closer to 36,644 (+/- 2%) before moving lower.
Daily engrbytrade™ Dow calculations continue to show a path to 38,473 over a very short period of time using a move similar to what occurred between October 13, 2021 and November 8, 2021. Preliminary calculations indicate a peak by February 9, 2022. This move should complete the engrbytrade™ 1929 model. In the interim, the Dow is expected to move up in the futures market to 36,830 to fill a gap created in the 5 minute chart on January 5, 2022.
The current Dow 15 minute futures chart between January 5, 2022 and January 10, 2022 is similar in structure to the Dow 15 minute futures chart between October 11, 2021 and October 13, 2021. Underlying daily engrbytrade™ Dow calculation results indicate an upward move similar to what occurred in October 2021 is expected in January 2022. Note that volatility will continue to increase.
To start the week, the 5 minute Dow futures chart is forming a falling wedge formation prior to the open. This is expected to reverse and move up to 36,830 to fill a gap left behind in the futures market chart.
As a point of reference, daily engrbytrade™ Dow calculations and structural calculations indicate the Dow is in the process of developing a 15 minute futures chart that is similar to what was developed between October 7, 2021 and October 13, 2021.
Daily engrbytrade™ Dow calculations confirm a move to 38,473 is in progress. Structural calculations indicate a rising wedge is expected to develop with the Dow hitting a peak by February 2022. This peak would be similar to what occurred in January 1973 and January 2000.
As of 11:46 a.m. (EST) on December 20, 2021 Dow futures hit a low of 34548 while dropping within a predetermined range of 34389 to 34559, as originally noted on December 16, 2021. Preliminary calculations indicate a move in the Dow futures to 38,473 (+/-1%) is expected.
The deferral of a move down to a range between 34389 and 34559, as noted on December 17, 2021, was initiated during the overnight futures trading session prior to markets opening on Monday, December 20, 2021. Upon completion of this decline to fill previous gaps, a move to 38,000 is still expected based on Market Maker accumulation activity and daily engrbytrade™ Dow calculations.
Market Maker accumulation activity between December 13, 2021 and December 14, 2021 along with daily engrbytrade™ Dow calculations at the market close on December 16, 2021 indicates the decline that was expected to a range between 34389 and 34559 will be deferred. A move upward is now expected to continue towards 38,000 on the Dow.
Chart courtesy of StockCharts.com.
Underlying data indicates Market Makers were engaged in a meaningful level of accumulation at the close on December 14, 2021. This accumulation relative to daily engrbytrade™ Dow calculations indicates positioning within a broadening formation shown above will result in a brief decline to a range between 34389 and 34559 in the futures market before moving to higher levels.
Additional data related to daily engrbytrade™ Dow calculations indicate a decline is still expected with a move down to a range between 34389 and 34559 in the futures market prior to moving higher.