MARKET POINTS: by Woody Dorsey
- Repeat: “Pundits may remain flummoxed. They do not realize that the Market has Changed.” The Market is like a River: It is Always the Same and yet, it is Always Different. 2016 was profiled to start off “quite weak.” That weakness should continue but is due to have a rally in Q2 to SELL into. The U. S. Election Escapades will expose what is wrong, rather than what is right, with Financial Culture. Stocks are in a “Viral Cascade” of Negatives. Buy the Dip is different in Bear markets than it is in Bull Markets! As I advised, “Bounces will now be confusing and may not last all that long.” The market is proving to be a day to day volatility circus. Once an interim Low occurs, it may be easier to trade. Stocks are likely to go LOWer4LONGer than anyone expects. But there will be plenty of opportunities along the way.
MARKET TIMING: The Profile was for upside potential last week. And, there were 2 huge Bounces and there were 3 higher daily closes on the week! But, all of that occurred in the context of a Bear Market as expected. Still, it was amazing to anticipate the shape of last week’s trade. The larger pattern has called for, “another Low due nearer to early February.” Current bounces could still last into 1/22ish. Declines have always been due into month end and are now profiling for a low near 2/5ish.
TIMING SUMMARY: Bounce potential is still possible for this week but the most overt indicant for an interim low is due near early February. Upside tries “may occur 1/22ish.”
SENTIMENT INTERPRETATION: The DORSEY Market Sentiment registered a series of daily Highs back in December that were the clues for an eventual breakdown. Low sentiment on 12/14 and 12/21 produced bounces but they were easily exceeded in January, further confirming a Bear Market. Last week there were numerous daily sentiment lows and most recently a % bullish for 1/19. I repeat but not everyone realizes: “Low Sentiment is not necessarily a Buy signal: Be very careful if you are entertaining any long ideas.” Yes, bounces are due here but may not be easily played.
The DORSEY Intermediate Market Sentiment has now registered levels last seen at the 8/24/15 Panic low. Yes, it may be signaling a price low in the making but it could become more cogent in 2-3 weeks.
SENTIMENT SUMMARY: Sentiment Behavior has been “best interpreted as being generically Bearish. The preponderance of Low Sentiment is actually Bearish!” As I said: “The surprise now may be that Bounces in this “Buy the Dip” environment are not as robust as they were.” Be very careful. I prefer to wait until early February to see if a better single and divergences are registered.
OVERALL MARKET SUMMARY: Stocks are in a large Corrective Phase. Don’t be seduced by Big Picture opining by the Pundits. This month still has an overall negative bias. Repeat: “Bounces may not be that Robust or Durable.” The preferred timing pattern allows for more turmoil and vulnerability. Once an interim Low is confirmed(early February?,) the trading structure may gain some stability
TECHNICAL VIEW by Gary Dean: Even though the SPX got crushed on Friday, the overall wave count and divergences have not changed. There are still 5 waves down and the SPX is trading within a bullish falling wedge. All of this suggest a reflex rally is pending, but the bulls have to break through some of the resistance levels above to get any momentum going. A break of the 1917 would be the first clue they are making a run. If they succeed in breaking above 1917, the door would be open for a move back up to the next resistance zone-1951-1990. All the ingredients are in place for a bounce, but until the bulls can break through resistance and show some follow through days-the bears remain in control.
- Resistance Levels-1917-1935-outsider 1950
- Support Levels: 1879-1857 outsider 1848
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Information is for paid customers and may not be copied or distributed Copyright 2016