MARKET ENVIRONMENT: by Woody Dorsey.
Markets are messy and may stay that way. Crude, Gold, IWM etc. It seems like a new kind of free for all! No one really likes to tell the whole truth and nothing but the truth. Reality is usually unpleasant. And so it goes. The Kavanaugh, “Crazytown” momentum is still getting weirder. This is still a poor time to time the market. There is still a lack of any sort of typical trading rhythm for the market but that does not mean it cannot become virulent.
- Near Term Diagnosis: Sentiment is 74% Bullish today. The downside reversal of 9/26 was completely rejected by the big pop yesterday.
- Interim Term Diagnosis: The Interim profile continues to be congestive.
- Long Term Diagnosis: Equities are in some sort of topping process. That is not relevant to trading decisions. I do foresee a Low due in 2022. But that does not mean the market is going to go down hard near here.
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MARKET TIMING: There are definite topping patterns but there are also definite strong tendencies to keep bouncing from any minor breaks. As noted, The next turning point price pattern is near 10/10 but it is not yet clear what it means yet. I still foresee a notable relief rally Dates Are For Members Only. That may be followed by more weakness than anyone expects into Dates Are For Members Only
SENTIMENT INTERPRETATION: The Dorsey Tactical Market Sentiment generated 98% on 9/21. That euphoria is still the extreme. The 9% bullish on 9/27, had a chance to be the beginning of a new trading decline. But, I opined then: “It may not and if not, that behavior will also tell us something.” Stocks never followed though and that keeps the behavior equivocal.
The DORSEY Intermediate Market Sentiment is continues to be in an inconclusive range. This measure of Market Sentiment remains, more or less, in a confusing congestion. So the overall message is still one of confusion for the market and for traders.
MARKET SUMMARY: Stocks basically remain congested albeit chaotic. So my view continues to be borne out: “There are still multiple cross currents in the interim time frame. Thus it is wise to become aggressively agnostic in the near term.” That is what has happened. It is continuing. It is a mess but that happens and is nothing to try to change. Wait.
TECHNICAL VIEW by Gary Dean: The SPX has been trading in a range within a range. The bulls continue to step in at the 2917 support and bears are stepping in as we approach the previous highs. There is a lack of bearish divergences on the 60 minute charts and that is suggesting we could see another new all-time high. But if that does happen, it should set up some bearish divergences. As much as the bulls have been resilient, the long side is not as safe as some think.
One of my primary reasons for saying the long side is not as safe as some think, is the internals that continue to diverge from price. It is not a sell signal, but definitely a warning sign, unless they can fix themselves.
The bulls need to push the spx above 2931 for a reaction trade up to 2937/2941. I think if they can get above 2937, they will take out the 2941 highs. The bears need to push the spx below 2917 for a reaction trade down to 2910-2903.
Nothing has really changed on the daily charts..The new set of highs has brought about a new set of bearish divergences on the daily chart. As you can see, the bearish wedge is still in place, even with these new highs. Jumping long blindly with a 3000 target (just because it is a round target) is a low odds trading plan. Maybe it gets there, but many thought it was getting there when we were at 2917 in late August-and had to wait until today to get out from losses. The point, the bulls have been resilient, but that doesn’t make just jumping long blindly safe.
Summary: The bulls have been buying the dips at support and continue to try and push higher. I think if they can get above the 2937, they will make new all-time highs. But that should set up a fresh set of bearish divergences on the 60 minute charts. And with the internals diverging, the long side is not safe.
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