MARKET POINTS: by Woody Dorsey
- “Stocks are likely to go LOWer4LONGer than anyone expects.” I may be saying that for so many months that you will become bored but it is the most important Diagnosis. Profiles still prefer that, a “Recovery was near” but that may be small comfort: Repeat: “In the months ahead, 400-800 point moves may be occur but may not mean what investors think.” This is a new kind of Market. It is unbridled Reality. This is not the time to put on big positions. Stay small. Stay safe.
- Near term Diagnosis: The plunge to 1812ish on 1/20 did “read as a Momentum Low.” It remains a significant time and price level. The decline 96% Bullish on 2/1 was due to last into yesterday. It did not make a new low but made a new closing low. However many other indices including foreign ones, did make new lows. The market is very dangerous. I noted yesterday that the plunge was a short-covering opportunity rather than a buying opportunity.
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MARKET TIMING: Declines were ideally due into 2/8 followed by strength due dates are for members only-join now. That is still the nominal timing pattern. What does nominal mean? It means, in name but not necessarily in reality. My work gives me these indications but one always has to read the particular situation and the larger timing to modulate expectations. Stocks are obviously very unstable.
TIMING SUMMARY: I had surmised: “Stocks may have deep setbacks but are not likely to challenge the lows.” That has happened but is not totally defined. Viral declines can do anything.
SENTIMENT INTERPRETATION: The DORSEY Market Sentiment registered extreme sentiment culminating with the 0% bullish on 1/19. The Sentiment Recovery ended with a notable 96% Bullish on 2/1. The nasty Decline from there has now generated a series of Low sentiments into today which is a loose fit with the Dorsey Timing. Still yesterdays’ late day recovery may have initiated a pattern of Recoveries which if it persists, could resolve into a multi-day Recovery.
The DORSEY Intermediate Market Sentiment registered levels of pessimism not seen since the 8/24/15 and 10/14 Lows. The longer term sentiment chart below shows the degree of those prior lows. This Sentiment History is why I have been saying that Interim Sentiment was suggesting a price low “in the making.” The degree of pessimism that has already occurred favors an interim low in the making. However, given the larger Bear Market profile, easy or very robust price gains should not be expected.
SENTIMENT SUMMARY: The pessimistic extreme of 1/20 is still cogent. I Noted: “It would be great to have a few scary episodes” this week. That sure is happening! Sentiment, as a standalone indicant argues for not being short but not necessarily for being long.
OVERALL MARKET SUMMARY: Stocks remain in a large Corrective Phase. But, the Big Picture is not our primary focus here. Declines due into 2/8 have been dramatic. Nominal recoveries may occur into dates are for members only-join now. Their viral nature opens the door for potential downside. Viral declines are inherently unstable.
TECHNICAL VIEW by Gary Dean: The best pattern structure I can see right now, is a series of ABC moves. If the bulls can step in and hold the 01/20/16 lows, this would be the wave (B), with an expected wave (C) higher pending. There are no bullish divergences on the 60 minute charts, but there are some on the 15 minute charts. The bears need to push the spx below 1828 to open the door for a test of 1811. The bulls need to push the spx above 1872 to get any upside momentum going. Unless the 1811 lows are taken out, this looks like the best pattern to follow.
- Resistance Levels-1873-1887-outsider 1901
- Support Levels: 1828-1811 outsider 1775
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Information is for paid customers and may not be copied or distributed Copyright 2016