MARKET ENVIRONMENT: by Woody Dorsey.
Stocks have continued to be virulently strong even as the Corona Virus continues to be viral and Domestic Politics become more viral. These are dynamic episodes which seem to lack any cohesive correlation. I had allowed last week: “A very robust recovery is happening. This market looks like a monster.” It continues to be. It is still best interpreted as late cycle ebullience. This timing pattern remains in force. There is still time for this volatility to engineer more upside thrusts before an overt failure. The profile for the Mid-March high is compelling.
- Near Term Diagnosis: Sentiment is 92% Bullish today.
- Interim Term Diagnosis: The Interim Trend remains at risk of reversing at any time but timing modalities allow for a secondary high near mid-March. That is not that far away. Declines are due from there into Dates are for members only a brief Summer rally before declines into early Fall. Stocks will bottom well before the actual election.
- Long Term Diagnosis: The next major Low is due in 2022 but a defined high has not yet occurred.
- QUESTIONS ANYONE? “Would welcome any comments about Silver.” Thank you. As noted in the last Precious Metals report of 7/22, all metals were bullish into an initial monthly high due 2/2020. That profile gave them their upside potential. Now, we see some softening as congestion takes hold. I did note that Platinum strength would be a big tell. It has been. Also, as I sure you note, that Silver has been a relative laggard to Gold. This allows that it may yet have a more independent burst up. So, I would not fade it. I may provide a full report in coming weeks on this.
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MARKET TIMING: The trading low was a perfect plunge. The Recovery into a secondary high in “Mid-March” has become dynamic. I have isolated timing near Dates are for members only for that.
SENTIMENT INTERPRETATION: The Dorsey Tactical Market Sentiment continues its’ dramatic recovery from the 1% bullish on 2/3. That panic has clearly seen as only a violent pullback. Short term sentiment measures have already regained lofty levels. Ebullience may now flatten out.
The DORSEY Interim Market Sentiment showed extreme divergent behavior before soaring. It is almost back at extreme levels. There is more time for further upside development into the March highs.
MARKET SUMMARY: Price behavior continues to conform to an important secondary high in the weeks ahead. Don’t be seduced but don’t be trigger happy either. My focus is for a definable high due in March. That would set up a notable decline into Dates are for members only
Trading Instrument (Gary Uses) My Trading Instruments are all based off of SPX numbers, but for long side trades I use (SSO) the 2x leveraged etf that follows the S&P 500 and when expecting the market to move lower, I use (SDS) the 2x leveraged etf that follows the S&P 500, it moves higher when spx moves lower.
TECHNICAL VIEW by Gary Dean: I honestly don’t have a lot to add to the previous report. I continue to look at this move as a wave 5 of (3) and once it completes, a fast wave (4) down followed by a wave (5) into Woody’s topping period. The problem so far, the bulls are using every 10 point move down to buy with both hands. Wave (3’s) can and do extend as we have seen for the past few weeks. We have divergences on the momentum charts as well as SOME internal charts, but the NYAD fixed itself, so the important divergence is NOT in place. The bears have to get price below 3340 to get any momentum on the downside. Until that is taken out, the bulls will look at every little dip as a buying opportunity.
There is bearish wedge was broken to the downside and now MAYBE we are back testing the bottom of the wedge? Tough call, but if this pattern is going to play out, the downside target would be between 3294/3214. It would make perfect sense if it did play out, as it would be the wave (4) I am waiting for. But in this good news is good news and bad news is good news, the nulls may just try and run things into Woody’s topping time period. That is still a ways away, so hard to imagine they could run the market for 2 months straight without a hick up–right?
As you can see on the chart below, the NYAD divergence is no longer in play. The green numbers are the larger wave structure, which is suggesting down and then up again. The anticipated wave 4 down could get down to the 3294/3215 and still fit the profile, but lets look for targets ONCE WE ARE SURE WAVE (3) completed
Internals continue to move in the opposite direction of the markets. The NYAD is divergence has been fixed by the bulls, so that trade is no longer valid. So whatever high we leave behind when this wave 5 of (3) completes, will most likely not be the high.
Summary: The bulls are absolutely relentless! Good news is good news and bad news is just looked at as good news, because it means the Fed will have to get involved. From a technical view, this market does NOT look safe, even if we go up every day. There are bearish divergences on all time frames. But until the bears can push the spx below 3340, the bulls will hang around. If we see a clean break below 3340, we should see 3290/3275 come fairly quickly. G
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