MARKET NOTES 11/04/15: by Woody Dorsey.
- I have noted over the last few weeks that the Market was strangely bid. The trade above 2063 triggered a Stop on short ideas and I proffered that, it a “great time to stand aside.” Todays’ Sentiment is 79% Bullish which is not particularly revealing. At any rate, waiting for clarity has been useful. As you know, there are latent profiles for some market upset over the next few sessions which also aligns with the Jobs Report. Thus, near term Reversals should now be respected.
MARKET TIMING: To repeat: “The market became overbought technically and High Sentiment does signal vulnerability but that does not mean that it has to decline.” Indeed stocks have gone higher. Those who are relatively new to Sentiment may thinking it is a, “Trading Indicator” and the High Sentiment suggests Short. It can be, but not in isolation. In reality it is a mirror of Market Psychology which always has to be interpreted.
I have mentioned that High Sentiment can be a positive for the Market! During a Trending function, positive sentiment is self-reinforcing. I have to look at several indicants to try to Diagnose it. I indicated the micro tell on 10/1 as a sign of a significant pessimistic extreme. The inability for a decline after an ideal 10/16 High and the failure to reverse importantly after the recent 98% Bullish were additional warnings that a typical tactical short covering Rally was NOT occurring. Thus, a larger degree Trading Function has been occurring. Yes, but it has now already reached key Resistance.
MARKET SUMMARY: Stocks entered a “Rogue Profile.” For that reason, I have advised caution. “This Market Situation is best avoided unless you are a very active scalping trader.” Cultivating a flexible Market Mind is not so Easy. It is best not to “Believe” anything you hear about this Market. The next full report is due on Thursday.
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