MARKET ENVIRONMENT: by Woody Dorsey.
The 1/26 parabolic “Buying Virus” High and the 2/9 Panic Low remain cogent Range boundaries, as expected. The “Trade War’ between Bulls and Bears continues. There may be tape bombs but stocks seem to be “just thrashing around.” Trade it. Big Opinions abound but are not useful for profitable trading.
- Near Term Diagnosis: Sentiment is 69% Bullish today as yesterday’s trade was seen as only modestly satisfying.
- Interim Term Diagnosis: Stocks have adhered to the profiled script by bouncing into 4/17-18 and turning lower within the existing interim range.
- Long Term Diagnosis: The rare “Lapdance of Liquidity,” engineered by Central Bankers is over. The parabolic rally into 1/26/18 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 profiled Bounces manifested into the “4/17-18” tactical high. Again: “I expect the market to be sloppy. No one likes it but if that is the Market Reality, embrace it!” Exactly. The point is that the next big moves are not due near here.
I preferred weakness into here and some secondary weakness in dates are for members only which would set up for strength dates are for members only. There is no huge esoteric timing code right here. But, the dates are for members only are date certain uncertainties and fit with a low of some sort. I prefer not to be looking on the long side until dates are for members only The dynamism of the last 12 weeks is resolving into a typical confusing range trade which frustrates the majority.
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SENTIMENT INTERPRETATION: The Dorsey Tactical Market Sentiment registered an optimistic spike to 99% Bullish on 3/12 and declined sharply into early April as another cluster of low sentiment identified a low and set up the profiled recovery into 4/17-18. The 93% Bullish there warned of the reversal. The 3% bullish yesterday was dramatic and produced a big bounce. This fits with the idea that the market is just thrashing around in a range.
The DORSEY Intermediate Market Sentiment has worked higher but not with any great conviction. This fits with my analysis: “This is synchronous with a further fleshing out of the interim trading range.” So let us just wait and give the market time to create a more defined sentiment advantage.
MARKET SUMMARY: The profiled recovery due into 4/17-18 did resolve into some downside. Thus, the context of this range has still yet to be revealed. Again, I did foresee some developing weakness late this week and that may still manifest. But, in general, this is not a really dynamic situation. I prefer to be a buyer after dates are for members only Trade the Market. Don’t Believe in it. Thank you, Mr. Market.
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TECHNICAL VIEW by Gary Dean: Tuesday and Wednesday we saw some panic selling kick in and the SPX made it down to my 2610 target. I covered my short position and am watching for now. I want to see some backing and filling and support hold before thinking long, which may or may not come. This is an all in-all out market and sometimes if you don’t jump in early, they never let you in. But a I have said numerous times, you don’t have to be in a trade every day. You only need 4-6 (200-300) point moves to see yourself in the top 5% of traders. The SPX is trading right at the first resistance line. If the bulls can push through, then 2675 would be the next target. They have enough gas in the tank to get there or even 2700.
Let’s look at action/reaction lines on the 15 minute chart. If the bulls can push through 2661 and stay above, then 2675 would be the next target and then 2700-ish. I believe for higher to play out, the bulls have to keep the spx above the 2644-2632 support. If the bears push it through that support, then 2623 and 2612 would be in play.
The only noticeable thing I see on the daily chart, is that buyers stepped in at the 200 dma. That would SUGGEST 2678 will be a magnet, which is the 50 dma. Nothing has really changed on the daily charts as far as wave structure. We are either forming a wave C up with another low coming or we completed the wave (4) down and within the next couple of months, will make a new high for wave (5). No need wasting any energy trying to figure out what the road map is-just trade the swing trades in both directions. Let the market tell us which wave count is correct.
Summary: We saw buyers step in at the 200 dma on the daily chart and expecting a move up to the 2678/2688 (50 dma) would be expected, but not guaranteed. The bulls have plenty of gas in the tank to take the spx higher if they wish. The question at hand, do they wish? I am expecting some higher prices in the coming hours/days, but remain neutral/cash in my trading account. We need to see the spx get above and stay above 2661 to see 2675-2700. If the bulls fail to defend 2644-2632, I think we have higher odds of testing the lows. Overall, the market action is following the “sloppy-choppy tape expectations. Let let the dust settle before jumping in on a directional trade.
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