Current Trend: Up from 04/02/18
Expected Top Date: 04/17-04/18
Resistance Pivots: 2722-2740
MARKET ENVIRONMENT: by Woody Dorsey.
The 1/26 parabolic “Buying Virus” High and the Panic Low on 2/9 remain the de facto Range boundaries. The “Trade War’ between Bulls and Bears continues to develop and tape bombs abound but it is just a trading market. Trade it. Don’t Believe in it. Big Opinions remain dangerous.
- Near Term Diagnosis: Sentiment is 84% Bullish today. Investors seem forced to keep nursing a friendly bias while keeping an eye out for tape bombs. This is not the time to Buy for sure but it may not be the best time to Sell either.
- Interim Term Diagnosis: The expected secondary Correction ended and was followed by profiled by bounces into 4/17-18. I do think: This overall profile fits much better if the market holds it together and fleshes the middle of the range.” If this range persists could set up a nice “Kill Zone” later on.
- Long Term Diagnosis: The rare “Lapdance of Liquidity,” engineered by Central Bankers has concluded. The parabolic rally into late January was a Mania extreme as described in my “The Seven Stages of Bull Market Behavior.” Again, investors typically remain in Denial for some time after an important high.
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MARKET TIMING: The market failed from the 99% Bullish on 3/12 into my profiled “Clipper type Correction,” which ended in early April. I was expecting a “trading high due around 4/17-18,” which inferred strength, “emerging out of this market carnage.” That is just what we got. At this point might give the market a day or two to show itself. Yes, next week will see some deterioration and some weakness due near early May allows strength into June: “All of which may just be a zig zag, short covering rally.” I am not fixed on any very defined timing until I see more trade. This has been a great timing call both ways and there is no reason to ever assume that it is possible to always have cogent near term market answers.
SENTIMENT INTERPRETATION: The Dorsey Tactical Market Sentiment registered a secondary optimistic spike to 99% Bullish on 3/12. That ended the short covering bounce. Prices and Sentiment then declined into early April and registered very low optimism including a 0% Bullish reading. That fit with the price profile and a recovery occurred into the 4/17ish time zone. So here we are. In a relatively neutral albeit slightly overbought condition.
The DORSEY Intermediate Market Sentiment continues to struggle higher by fits and starts. The more it recovers the better it fits with the price profile. This behavior seems synchronous with a further fleshing out of the interim trading range.
MARKET SUMMARY: The profiled recovery due into 4/17-18 has occurred. However, the context of the range trading still has yet to be revealed. What kind of bounce is this? As we don’t know yet, it pays to be cautious. Upside ideas into this timing have been profitable and may be retired. That is no guarantee that shorts are the next best thing here. So, sit tight? Do see developing weakness next week. Trade this market. Don’t Believe in it. Thank you for this, Mr. Market.
TECHNICAL VIEW by Gary Dean: After jockeying up/down for the past 2 weeks, we are finally seeing the bulls try and break out of this range. As I mentioned in the morning notes, I am using this move to scale out of my long position from 2624. I am leaving 1/2 open and if we get up to the next target 2711, I will take another 1/4 position off and let the remainder run.
There are bearish divergences in place, but the way this move higher has formed, it has really just started yesterday. So I am going to give the benefit of the doubt to the bulls and expect higher, but will be fast to move to cash if we reverse. But one indicator I watch carefully is the advance/decline and it is SUGGESTING that we still may have a ways to go up-before we top. That is NOT a guarantee, but it is making new all-time highs and if history is our guide, the spx typically follows. Which would bring that wave 4 low and wave 5 up into play.
If the bullish can break above the 2711, I believe they will try to make a run for the 2740-ish area. Holding above the 2670 and then 2645 support is important for them to remain in control.
If the advance/decline is TRYING to give us a clue-then the wave (4) down completed and we are now heading for a wave (5) up, maybe to new highs. We are a ways away, but something to keep in the back of your mind-if we see the tape continue higher here.
Summary: The SPX is heading into resistance near the 2710-ish area. If the bulls can push through, I think the 2740 resistance has a chance of coming into play. The advance/decline is warning not to jump short without having stops in place. It is making new all-time highs. But scaling out of long positions and running with a smaller amount is my game plan. The bulls have to hold the 2770-2745 line to keep pushing higher.
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