NEAR TERM: I warned, “Don’t be seduced by rallies.” There is great trading volatility to play with here but the rest of the year may end up looking like a great big grind.
INTERIM TERM: “Interim correction into February/March.” That is a wonderful profile. Give it time to unfold.” It is unfolding. Don’t be surprised by declines nor by tactical bounces. Let’s see what levels early January brings.
DORSEY MARKET SENTIMENT: Extreme bullish complacency was a structural psychological error. IT STILL IS. Investors are still complacent. Sentiment has been overly optimistic for quite a while.
MARKET SUMMARY: Equity deterioration remains due into February/March 2022. Inflation may be transitory and could only last for a decade or so? Easy money was too easy. Markets are paying for that. Repeat: “Enjoy the bounces, while they last.” & “Enjoy the declines, while they last?” Enjoy the holidays no matter what Jerome says!
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: The bulls took the extremely hawkish tone from the Fed to cause a massive short squeeze. This has given us another NYAD sell signal. I expect some backing and filling soon, maybe down to the 4660o-ish support followed by another press higher. This should set up a more defined NYAD sell signal, as this one looks a little strange.
The preferred pattern that the larger wave 5 was complete, is really getting tested now. With price where it is with no major sell signals, it looks like those highs will get taken out. It doesn’t make this market any safer to buy blindly. A larger move down is pending, but it just may have to wait until Santa passes.
The 60 minute chart below is showing the larger range in play. 4743 is the top, 4662 mid and 4702 bottom. Until the bears get price below the mid line, the bulls are in control. I am NOT seeing any massive sell signals, which is suggesting down and then up again to form those sell signals. It is a bullish time period, so be careful shorting, but pick and choose spots to buy with tight stops. There are many obstacles out there that can turn this market lower on a dime.
The short term resistance zone is between 4732/4743. The bears need to get price below 4704 to even get a few bulls to look at them. They really need to press price below 4662 to get anything going on the downside. The bulls will remain active buying dips until the 4662 is taken out.
Summary: The expectations was to buy down near the 4603/4593 support and look for the start of the Santa rally. We came close and the Santa rally has indeed started. I wouldn’t chase here and see if the 4660 support range holds to possibly look long. But be careful, as I have said plenty of times, there are a lot of things lurking that could turn this market lower without any warning! G
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