MARKET ENVIRONMENT: by Woody Dorsey.
There is nothing to worry about. Talking Heads Explain Everything but their Teleprompters are rigged. I had read the Profileprompter some time ago. It said: Expect Inflation, Rising Rates, and an ending Equity Adoration. And recently: “Recognition on Rates and Inflation is an important psychological development.” These are still very early days folks. Equities are taking their time turning.
This Week: This week had been corrective but with expected bounces into month end. Next week is corrective.
- Near Term Diagnosis: Sentiment is 92% Bullish today.
- QUESTIONS ANYONE?
MARKET TIMING: No change: A nominal trading low is due in the 3/4-10 time zone. That makes next week looking corrective gain or maybe more sideways trade in a nowhere distribution which only extends the seduction that stocks cannot really go down. Nominal trading high near 3/26.
SENTIMENT INTERPRETATION: The Dorsey Tactical Market Sentiment registered 1% bullish sentiment on 2/1 led to bounces into the 98% bullish on 2/9 which turned the market down in alignment with the price pattern. Now, todays 92% likely ended the up opportunity for this week! Again, “Stocks need to break the lows of 1/29 to confirm an inevitable structural change in the market.”
The DORSEY Interim Market Sentiment, had a hard run to the upside before reversing importantly. That was a symptom of an obscene liquidity occurring a late cycle Boom.
MARKET SUMMARY: The Zoom Boom will be followed by a Bust. The trading profile allows for a trading low in early March. I am looking at both the fourth and 3/10 as dates. Profile may then turn up into 3/26ish. It is a mess. Potential Kill Zones or Spikes are best due later on.
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 preferred pattern of a topping process up here is still in play. There are bearish divergences on all time frames, as well as the internals and as Woody has been saying, everything will be crystal clear as to what traders should be doing here–buy in March maybe May. Primary Takeaway–Q1 2021 will be very hard on the stock market, we are here and the bulls have not let go yet!
We remain in an all-in/all-out trading environment going nowhere at 500 mph. We saw the bulls step in at the 50 dma on Tuesday and proceeded to rally the spx from 3805 up to 3930, where the bears where waiting to defend that important resistance line. Now we are testing the 200 dma on the hourly chart and if the bears can press price through, we should see a reaction trade down to the 3860-3830 support. The biggest risk I see right now, is on the side of the bulls. They have been on defense for a while and if price breaks below Tuesday’s lows (3805) we could see panic selling hit and the bull trap that was set, captured many retail specs buying yesterday’s short squeeze. We are at an important level right now-the bears need to get price below the 3880 support to see momentum pick up. Nothing has changed as far as the bigger picture–we either completed wave 5 of 5, or in the final stages of completing it. I personally think we completed it.
The wave structure is very mature and it may have already completed wave 5 of 5. The bears have pressed price down to the 200 dma on the hourly chart and they really need to get it below the 3875 for a quick move down to the 3830/3805. The bulls massive short squeeze yesterday was stopped right at resistance, with little fight.
The range in place is 3930 top-3890 mid and 3860 bottom. A move below 3860 could very well trigger some selling pressure down to the 3830/3805.
Summary: The bears stepped in right at resistance and pushed price lower with little fight from the bulls. Now we are at some important levels and if the bulls don’t defend, we could see selling pick up. A move below 3805, could cause a massive sell off. Beware of the very hungry bear–he has been waiting patiently from quite some time.
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