MARKET ENVIRONMENT: by Woody Dorsey.
I repeat: “The BitCoin phenomenon is a kind of “Permissioning Parallelism” for the Stock Market. Crypto is an “advertisement” that assets can just keep going up, no problem. You don’t have to understand Crypto. You don’t have to understand the Stock Market! You just buy it. This phenomenon is a sign of a late stage bull market. This remains the rarest of rare market environments. May the Block Chain be with you! It is the holidays who cares. Everyone is just waiting to spend their bonus, chug some Long Island Ice Tea and open their Xmas presents. They just want to play with their Block Chains!
- Near Term Diagnosis: Sentiment is 37% Bullish today. Stocks re really just churning around.
- Interim Term Diagnosis: An interim high can occur at any time. I prefer some sort of corrective pattern may last even into dates are for members only before another run up into Q2. The break above 2480 on 9/11 triggered a neutral view. This years’ rally has been a “Double Up.” The second leg up in the “Double Up” is very mature. It makes market sense for a larger degree of time correction once an interim high is registered.
- Long Term Diagnosis: Stocks are in an extreme endgame. The rare “Lapdance of Liquidity” engineered by Global Central Bankers in 2009 is slowly coming to conclusion.. This psychological momentum even into mid-2018.
- QUESTIONS ANYONE? Client Questions: No Client Questions Today. Please email any questions as they are likely to be of interest to all readers and may inspire me to provide more and better answers to the mysteries of the market than I might offer just on my own. firstname.lastname@example.org
MARKET TIMING: Near term timing remains very strange. Stocks are dominated by rare longer term indicants. I continue to be amazed by the lack of rhythm in the near term market timing. There is an interim trading low due in dates are for members only. which might just be another “Buy the Dip,” Trip. Stocks can have some surprising setbacks at any time, near term. There is a timing cluster due near 1/5 which might give rise to some soaring prices. That makes sense if we can get corrective into there. It does tell that volatility is actually going to increase.
SENTIMENT INTERPRETATION: The Dorsey Tactical Market Sentiment is still generating extraordinarily High Sentiment. There has been no decent negativity and as a result, stocks are simply able to recycle back up within their existing bullish bias. I warned that high sentiment like 100% was not a sell signal. Sentiment is always a symptom of the market condition. You can see on the near term sentiment graph that the 94% and 95% bullish sentiments indicate froth. Again, very low sentiment on new negative news may be required to confirm a larger tactical turn.
The DORSEY Intermediate Market Sentiment continue to create extreme divergences but stocks have not responded to that. Again: “This intermediate term sentiment metric is still not offering any conclusive price interpretations.” This strange sentiment behavior fits with the reality that a “rare market process is still unfolding.” New negative sentiment is required to change the existing bullish complacency.
MARKET SUMMARY: Stocks remain at risk of corrective surprises. Extreme sentiment froth and historic news has occurred but is now certainly known. The S&P is not a Crypto Currency. Stocks are tired but strange. Don’t pet rabid dogs no matter how cute they may seem! May the Block Chain be with you. Cheers.
TECHNICAL VIEW by Gary Dean: On Tuesday I said “The wave structure is very mature, but there are no bearish divergences in place”. I was expecting some backing and filling based off of the bearish divergences on the /es hourly chart. We did get that and the bulls came in right at the support line (see 2nd chart) We are seeing some buying today and in the coming hours/days, I would not be surprised to see the spx try for the 2700 level. That should set up some bearish divergences on the spx and that would set up the possibility of a larger point drop. How far it heads down, we will have to watch. Being the wave structure is so mature, there is risk assuming we will head to 2700, but if we do, we have a larger wave 5 pending and once that completes, we could head down further than anyone is expecting. But as always, until the bears can get the spx below the 50 dma on the hourly chart-it would be hard to say this wave 5 won’t extend even more.
When looking at the 15 minute chart, it appears the spx is consolidating between the 2675 and 2691. A break of 2691, we should see 2695-2700 or higher. A break of 2675, 2665-2640 would be in the cards. The trigger for a long trade would be above 2691, with a stop at 2678. A trigger for a short trade, would be a break of 2678 with a stop at 2691.
The wave 5 is very mature on the hourly chart above-but it is within a wave 3 on the daily chart-shown below. This often gives us false tops and extends, but doesn’t change the wave structure, which makes it dangerous to become complacent on the long side. Once this wave 5 of (3) completes, a larger wave (4) down will start–before a larger wave (5) to new highs hits..but that is a ways away and we are concentrating on the next move coming.
Summary: The lack of bearish divergences had me thinking the bulls were going to try for a new high before any meaningful drop would take place. The bulls stepped in at support and looks like they MAY be trying for that new high. Being the wave structure is so mature, it is not guaranteed that new highs will come. But history is saying they will. It does not make the long side safe.
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