MARKET POINTS: by Woody Dorsey
The Headlines were: “Stocks are making record highs.” I said, “Do not Believe in this market.” The Good News, New Highs and High Sentiment are typical of the Golden Halo (GH) formation but cannot be confirmed without an overt reversal down.” The GH has confirmed the high is in place and the correction has started.
- Near Term Diagnosis: Sentiment is 2% Bullish today. The sentiment torque from 93% to 2% represents a classic change in Market Expectations. Still, something like a 3 day pop could easily occur but would only be short covering.
- Interim Term Diagnosis: A Golden Halo (GH) has formed.
- Long Term Diagnosis: The TrumpTop will result in a “very meaningful decline.” It is due to last for months.
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MARKET TIMING: The profile was for a trading High 5/10-15 with the potential for another lazy upside try into late May. Now, the Interim Top has been signaled. The generic timing profile remains for, “Tactical negativity in June.” If I had to guess for you very short term traders, a Recovery Friday sets up another sell near 5/24-25? Keep in mind that the market has likely embarked on a multi month correction.
SENTIMENT INTERPRETATION: The Dorsey Tactical Market Sentiment registered a 93% bullish on 5/16. That was the High and it fit with various timing modalities. Todays 2% Sentiment signals a significant alteration in market expectations. The DORSEY Intermediate Market Sentiment is also now beginning to turn down. The Bullish Hypnotic Trance is fading.
MARKET SUMMARY: Stocks terminated their Golden Halo (GH) formation. I suggested last week: “We will all look back on these “Golden Days” in a few months and wonder why everyone was so friendly!” It will take time for the Mass Market Psychosis to unravel. Don’t be complacent.
TECHNICAL VIEW by Gary Dean: The range for the SPX is 2405 high and 2322 low. The bears need to push the SPX below 2343 to get the energy to drive the spx to the 2322 low range. The bulls need to push the SPX above the 2369 to give themselves a try at 2374-2381.
- Short Term Support- Below 2351 is earliest clue 2343/2334 may come into play
- Resistance Levels: 2369-2374-2381
The bearish divergences-wave structure and GH set up were all in line for yesterday’s big drop. We have to expect bounces in the beginning (like we are now) as the bulls have been trained to look at EVERY 1 day drop as a buying opportunity. A few failed rally attempts should shake their “I must buy the dip” mentality. We aren’t an Elliott Wave service-but I like to show them as a visual to what Woody is expecting.
With upside wave structure complete, this downside wave structure could take the SPX down towards the 2322 lows-and it could head all the way down to the 2256 and fit the profile. Let’s not get fixated on where we are going just yet. We will zoom in when short term buy signals start showing up. 2369-2374 and 2381 is where I expect sellers to start back in again. Watch for possible buyers at the 2343 support zone.
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