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Can The Stock Market Really Be Predicted? Woody Dorsey Has Predicted Market Reversals Weeks In Advance For Over 1900 SPX Points-Since September 2014

 

MARKET ENVIRONMENT: by Woody Dorsey:   I suggested that the decline might end towards the end of last week: The weird divergent news, optimism and market behavior of this Summer was unusual and fits with the potential for a very long term cycle cresting. I am trained to view events and interpret them in terms of investor psychology and Market Energy. Markets are “Loco.” But, actually, they always are. They are never logical. Enjoy the Wild.

• Near Term Diagnosis: Sentiment is 47% Bullish today. Last weeks’ 0% and 2% were extreme readings which did identify a panic nadir.

• Interim Term Diagnosis: “The divergences in Sentiment, Advance Decline statistics and a multitude of negative market stories argued for a cogent Interim High in place.” It was a telling break but it is way too simplistic to just take a one dimensional market view. Expect twists and turns. The market is very messy.

• Long Term Diagnosis: Equities have likely registered a Cycle High. That is not necessarily relevant to trading decisions. There is a Low due in 2022.

MARKET TIMING:  A tactical trading low was ideally due last week and came in on 10/11 synchronous with the 0% Bullish.  Expected: “This week is messy with an upside bias due Dates are for members only. Given the expansion of the range, it may all amount to not very much.” … “I still foresee a notable relief rally in Dates are for members only. That may be followed by more weakness than anyone expects in Dates are for members only.” The code is for a nominal Recovery into Dates are for members only and, post-Election, some decent upside episode into Dates are for members only followed by perhaps surprisingly robust downside in Dates are for member only.  It is still a nice narrative but I am leery of becoming complacent about it. I may have some new codes for next week’s report. “Loco” market moves can occur.

SENTIMENT INTERPRETATION: The Dorsey Tactical Market Sentiment generated 98% on 9/21. That was the High close. It is amazing how telling these numbers are!  From 2 weeks ago: “ A hard down day into the close with very low sentiment has not happened.” Well that happen with the 0% Bullish on 10/11.  I said: “It is a great time to cover.”  It was. Now the big surge did generate a 93% Bullish but that cannot be easily interpreted as the end of a bounce. It may be a signal that a recovery is clearly underway and will persist even if it goes nowhere.

The DORSEY Intermediate Market Sentiment did notably crater and offered an extreme. It did approach the lows of February. It still has plenty of room to recover.

MARKET SUMMARY: The nominal timing code was for a low late last week. Yes, I think the market will stay messy here but: “There is definitely upside in Dates are for members only.” It still makes market sense for more churning.  Reality is, “Making Markets Great Again.” Great for traders!

TECHNICAL VIEW by Gary Dean:   Things are bit tricky here from the technical side. We didn’t get any bullish divergences on the 60 minute charts, which leaves the door open for a lower low. That would set up a great buying opportunity if that did happen. But the preferred pattern is on the 15 minute chart below, showing an ABC pattern higher into the next top date Woody has provided. If the bulls decide to continue higher here, they have resistance between 2818-2831 that they will have to push through. Anything can happen, but I don’t think they have full buy in from traders to try and break through that resistance zone on the first try off the lows.

The 15 minute chart is my preferred pattern, where we just completed 5 waves up to make a minor wave a. There are bearish divergences in place, which is suggesting a minor wave b down is in place. The downside pattern target is 2750-ish and the upside pattern target is 2860-ish. It does fit Woody’s timing dates and I will look at this as the pattern we are in until it proves wrong.

Summary: My preferred pattern is we are making a wave b down that should take the spx near the 2750 area. If support holds, I will be looking to buy. The longer term wave structure and lack of bullish divergences have me on the cautious side for now. Let the dust settle before picking a side for now. G