MARKET COMMENTS by Woody Dorsey: Significant Global Market Changes have continued and may be beginning to achieve cohesive traction. U.S. Equites are finally signaling that an interim High may have been registered. The proof of that premise will be told by how well it recovers over the next few weeks. It is always the most important thing to know where a Market is within its Campaign. Thus, if stocks do provide confirmation of a larger turn in the Trend, trading strategies can be aligned with that. I am also watching the Chinese Stocks. A real reversal there will be an additional confirmation.
The S&P low in early April was the beginning of the latest Rally. It ended on 5/20, so far! It had a 5 Month Rally. Now, stocks have just had a typical, albeit minor, decline in terms of Time, Sentiment and Support levels which was due to resolve into a Bounce. The timing profile suggested that a friendly FOMC pattern argued for a rebound over the next few weeks and even into the end of Q2. Thus there are trends within trends. I prefer some upside from here in the context of a larger topping process. As always, “Maintain a flexible Trading Mind.”
MARKET ENERGY: Market Energy for this week suggests some weakness on 6/12 and also into 6/15. The FOMC vibrations should be friendly and a positive drift into the end of Q2.
MARKET TIMING: Expected Bounces should continue. It would be specifically telling if these rebounds into perhaps early July “looks” Corrective. Minor but overt negativity is due 12ish. Potential Topping generically due in the Week of 6/22 and specifically due 7/1ish. That is just before the Holiday and @ month and quarter ends. That could be a big day and usher in another correction into at least 7/15ish.
MARKET “TELLS”: Global Equities, as I allowed, indicated “Global Market Change.” They have had great declines and are now having well welcomed and well deserved bounces. This behavior assists the Bounce profile in the U.S. Again, the Reality is that Rates will be rising for Decades and even Centuries. The Dollar still has a bid which is an important component for potential crises this year. Currency and Credit Crises are looming but may not be ready to become viral just yet.
SENTIMENT INTERPRETATION: The DORSEY Market Sentiment measures continue to identify the Key Support near 2040-2045. I identified Support as being near the 2068ish level (where the last low sentiment occurred.) The Cluster of 90%+ Sentiment Readings in May indicated Emotional Excess which was typical of a Distributive End Game. I allowed last week that the 2125ish level was a solid stop level for very aggressive traders. The Sentiment of 4% Bullish on 6/9 suggested a Low, in concert with the fact that stocks had been declining for 14 Days. Stocks closed on their lows and then made a new low near key support before Reversing overtly. Today’s 91% Bullish is confirming of that Upside.
This was a typical, “Sentiment Torque.” Very Low Sentiment followed immediately by very High Sentiment is, Bullish! It all depends on the context. Again, it was of note to me that the S&P had declined for about 14 trading Days which was similar to the Trading Declines that ended in Mid-January and in Mid-March.
INTERMEDIATE TERM: The DORSEY Intermediate Market Sentiment had a notable pullback on the recent decline and is headed back up again as the Price and Sentiment Range continues. Again the Rally from early April Low may have ended. Yes, this is a bold diagnosis which can only be confirmed by seeing some more trade. It would be a Critical Inference and provide excellent trade location information. I will be watching it.
MARKET SUMMARY: Stocks remain vulnerable and may have subtly confirmed an Intermediate Term Top. Stocks did put in a tactical bottom and remain due for a respite into early Q3. How they trade will be very instructive for confirming a Bear case. Has the End Game ended? I am willing to wait for the Market to declare that.
TECHNICAL VIEW by Gary Dean: The SPX came to close the open gap at 2114. There are some short term bearish divergences as well as 5 waves up. This would suggest some type of pullback starting in the coming hours/day. If higher is needed, the next level to watch would be the 2122-ish area, where we may see the bears try and defend. Above that level-the bulls will have full control of the short term tape-and we already know they have control of the long term tape.
If the divergences and high sentiment does cause some type of pullback, we want to watch the 2100 and 2087 as support. Below 2087, something else may be going on and the bulls will be forced into a defensive mode. The SPX has gone up a lot of points in the last 2 days-some backing and filling would make sense here-and the divergences are supporting that view as well.
Resistance Levels-2122/2126
Support Levels: 2100/2087
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