MARKET ENVIRONMENT: by Woody Dorsey. The next important low is due in February/March 2022. I have allowed that some ‘Stupid Congestion’, may yet develop this Fall. Sentiment is coming in today @ 66% Bullish. The trading profile allows for typical seasonal bounces. We are getting those. But they are due to flatten out but persist into nearer Thanksgiving. There really is Inflation and may even spike into a Hyper Inflation.
NEAR TERM: Bounces are getting toasty. There is a micro negative indicant due later this week. So don’t believe in the foliage. It will be changing soon. Look for some weakness next week before further attempts into more of a hopeful recovery phase. That would dovetail with the expected consolidation.
INTERIM TERM: The timing structure is still for a larger correction into February/March 2022. Still topping potential into Thanksgiving.
DORSEY MARKET SENTIMENT: Extreme bullish complacency was revealed as a significant psychological error. It always takes time for the majority to catch on to what has already been happening. Stocks are still early in a recognition that a real correction is quite possible and has actually already been occurring.
MARKET SUMMARY: The Liquidity party is still ending. Reality is in the process of arriving. Expect more deterioration both subtle and, overt at times, into early 2022. All hail Inflation and all that entails for the markets.
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 bigger picture preferred pattern is looking for weakness or choppy markets as we head into 2022. The pattern is best fit with the current rally being wave c of a larger wave (B) and once completed, a wave (C) down should start. But for this to play out, the bears need to step in soon or they will lose control and we will see another new high. The range we are in is 4540/4241 and anybody holding long/short from August has gone nowhere. We are in a trading environment and just look for 100-200 spx points and step away.
The resistance zone moved up and now between 4510/4530, which is the last stand for the bears. If they lose it, the only other pattern I see would be a very choppy market between 4540/4240. No matter what plays out here, the market environment is NOT safe for the bulls. Expect some of the big playas to start unloading between now and the end of they year. They are NOT going to want to risk tax hikes by the Dems. That will be a hidden headwind for the bulls.
I am seeing bearish divergences on the 15’s, which is suggesting the bulls are running out of steam here. I am expecting a test of the 4432 support soon.
Summary: The bulls have rallied the spx some 200 points with 3 massive gap higher opens. The 15’s are suggesting the bulls are out of gas and we should see a test of the 4430-ish come into play in the coming hours/days. G
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