MARKET POINTS: by Woody Dorsey
The 99% daily Bullish Sentiment on 3/2 represents a cogent High. A wonderful decline occurred into the 3/27 Low. There were indicants for a price recovery this week which has occurring. It makes sense now for some sloppy trade into weekend and month end. If you are, or wish to still maintain, a short bias: Risk Management remains basic: Keep STOPS near 2382ish. The price pattern suggests that can be tested so in practiced I prefer a Neutral view.
- Near Term Diagnosis: Sentiment came in at 61% Bullish today. Bounces are tiring but can continue.
- Interim Term Diagnosis: The Trump “Melt Up” has had a Correction but remains due to segue into a “Buy the Dip” set up. I am looking for a secondary Summer High to set up for a much better decline.
- Long Term Diagnosis: The TrumpTopping Process will eventually result in a “very meaningful descent.” But, there is still time and room for further Upside developments.
- QUESTIONS ANYONE? No client questions for today.
- The market is always a story. Talking Heads explain everything in hindsight with a convenient Rationale. They can and will never tell you about a huge decline ahead of time. A Crash requires unusual circumstances. I am looking for recent declines to resolve into a, “Buy the Dip” seduction. A more cogent failure farther along may set up a series of several Kill Zones ahead of Black Holes. Big declines usually happen in the last chapters of a market narrative.
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MARKET TIMING: The 99% Bullish and Price extreme on 3/1 remains cogent. March was profiled to be a negative month, which it was. The nominal timing allowed for a recovery into month end and quarter end, which is occurring. I profiled another trading high in early April might resolve into another downside try into near 4/20ish. That presumed behavior actually infers the development of a Range.
TIMING SUMMARY: March was due to be weak and the decline from 3/2 into 3/27 was the best sell-off in some time. As I noted, there strength was due this week into month end and quarter end. Now, the nominal timing pattern is for potential upside into 4/6ish followed by potential downside into 4/19ish. As I note, this is likely to a fleshing out of the range between 3/1 and 3/27 price bounds.
SENTIMENT INTERPRETATION: The Dorsey Tactical Market Sentiment registered a 99% Bullish extreme on 3/2. That remains the extreme Price and emotional High, so far. The decline into new lows on 3/27 was dramatic but recovered during the trading session and thus, did not generate an extreme Daily Sentiment.
The DORSEY Intermediate Market Sentiment deteriorated to levels commensurate with prior trading lows. This allowed, as proffered, for bounces. Given the “Buy the Dip” expectation in the profile, the investing populous does not seem to have really changed their prior bullish expectations.
SENTIMENT SUMMARY: Market vibrations had a dramatic change from “Overexcited” on 3/1 to pretty “Scary,” on 3/27. There was extreme pessimism intraday there. Sentiment allowed for tactical bounces this week in alignment with the timing profile. That Recovery continues and it is neutralizing recent Negativity.
MARKET SUMMARY: A trading Top occurred on 3/1. This week was profiled to be a Recovery. The Low on 3/27 is tactically cogent. Thus, 2322-ish becomes important Support. There is another Timing low due near 4/20ish. That is a Time, rather than a Price, projection. So, don’t expect Prices to be going down straight into there by any means. Price is bouncing and needs at least one Up/Down sequence. Don’t get too Excited or too Greedy. It remains way too early to obsess on the coming crash which is due much later on in this cycle.
TECHNICAL VIEW by Gary Dean: The bulls need to push the spx above 2370 resistance zone for a reaction trade up to 2377-2383. The bears need to push the spx below 2359 for a reaction trade down to 2354-2345
- Short Term Support- Below 2359 is earliest clue 2354/2345 may come into play-below 2345, then 2337 may become a target
- Resistance Levels: 2370-2377-2383
We are stuck in no mans land here as far as patterns/wave count. We are seeing the bounce Woody was expecting last week, but we still could see some sloppy choppy tape here. The patterns in play are: Bullish-we made an ABC wave 4 down and now are making a final wave 5 up to test or break the highs. Bearish-we are in the process of making a wave B up with a wave C down to test or break the lows-with a target of 2300-2280-ish. The tricky part about this-we could head all the way up to the 2390 resistance and still be in a larger wave B with a wave C down pending. What this is suggesting-is there shouldn’t be an upside melt up-and their is risk to the downside. With the bearish divergences on the daily charts-I would be careful leaning hard to the bulls side-but we still could push higher.
I added a color coded spread sheet to show the technicals on different time frames. The easiest way to view this-is to look at momentum-signal and then support/resistance. Obviously it would be great to buy when all are on a green code and look to short when all are on a red code. We were neutral to overbought as I type on the 60 minute charts-with all other time periods in overbought territory. This would suggest some backing and filling-or a move to the downside at one of the resistance zones ahead. Being we are on a buy signal on all charts except the 60’s, is saying to stay in trade mode if we do see a push lower. If we do get a push lower and these switch to sell signals-that would support the larger wave B has completed.