NEAR TERM: As I warned, “Don’t be seduced by rallies.” There is great trading volatility to play with. 3% Bullish today may argue for bounces. Now there is also a profile for some strength right into year end. So, keep your shorts on a short leash It looks like it might be a strange year end.
INTERIM TERM: “Interim correction into February/March.” That is a wonderful profile. Give it time to unfold.” Don’t be surprised neither by more declines nor by tactical bounces into year end. Let’s see what levels January brings.
DORSEY MARKET SENTIMENT: Extreme bullish complacency was a structural psychological error. Sentiment had been overly optimistic for some time. It can still take plenty of time to achieve a durable pessimistic extreme. But short term sentiment is low enough to foster short covering.
MARKET SUMMARY: Equity deterioration remains due into February/March 2022. Inflation may be transitory but could only last for a decade or so? Easy money was too easy. Markets will be paying for it for some time. Enjoy the holidays!
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: If anyone doubted the chaos/confusion period, they are believers now. It is hard to jump in (either direction) when you have to get in while it is whipping past you at 1000 mph. Unless in a position, it is sometimes best to watch the speeding see/saw and wait for the dust to settle. The NYAD buy/sell signals have been very good looking both ways. We made new highs with the last NYAD buy signal and we have seen fast nail biting drops with each sell signal. There is no signal today, so lets just keep and eye on support resistance.
The bulls still have the seasonality time period on their side as well as some extreme bearish sentiment readings. Yesterday’s drop took the spx below the 50 dma which did have some bulls a little nervous on their melt up Santa rally. But today we are back above it and if the bulls want any chance of seeing Santa come this year, they must keep it above that 50 dma. Nothing has really changed from the wave pattern view, so lets see how the tape reacts at resistance levels.
There were no buy signals on the 60’s, but momentum was quite oversold. I am going to watch the 4631 line, as you can see below, we have crossing ma’s and that is where the bears have to defend. If they lose that line, Santa may be coming after all. The bears need to get price back below the 4628/4593 resistance to see a panic sell off.
The short term resistance zone is between 4600/4630 and I believe we will see sellers waiting. That is IF the master planners don’t gap above it tomorrow. 4662 is the upside bull/bear line. So the bulls have some work to do to dig themselves out of this jam. Below 4572, we could see another sell off to test the lows.
Summary: The chaos and confusion trade is in full gear. The second bears get complacent, we see a massive short squeeze. The second we hear about the melt up, we see the bears step in and punish the longs. Watch the 4630 resistance for a clue if Santa is coming. The easiest way to view this market-if the bulls get above 4630, they will have control of the short term direction. The bears have to get price below 4572 to see momentum back on their side. Have a Happy Holiday!! G
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