MARKET POINTS: by Woody Dorsey
The 99% daily Bullish Sentiment on 3/2 was a cogent emotional High. A good decline occurred into 3/27 Low and set up this expected Recovery. If you have, or wish to maintain a short bias: “Keep STOPS near 2382ish.” The S&P is technically “messy” here.
- Near Term Diagnosis: Sentiment came in at 26% Bullish today. Yesterday’s failure was sobering but the market is soldiering on in a range function.
- Interim Term Diagnosis: The Trump “Melt Up” is correcting. I am looking for secondary Interim Highs to sell into. I call these highs, as the 3/1 one was, Golden Halos (GH) which are the obverse of Black Holes (BH.)
- Long Term Diagnosis: The TrumpTopping Process will eventually result in a “very meaningful decline.” Investors should not be long of this market but that is not a license for traders to indiscriminately short the market.
- 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.
Please email any questions as they are likely to be of interest to all readers and may inspire me to provide more and better answers to the mysteries of the market than I might offer just on my own. [email protected]
MARKET TIMING: The 99% Bullish extreme on 3/1 remains very cogent. The ideal profile was for a down March, a pop in early April and a further correction into somewhere near 4/20ish. I noted that the next day or so was dynamic: day and has big data. “Watch for a spike reversal there.” Yesterday’s trade may have satisfied that indicant. If not, or at any rate, be very careful here. The nominal timing remains for downside into Dates are for members only-subscribe now 50% off which may result in fleshing out a range between the 3/1 and 3/27 price extremes.
SENTIMENT INTERPRETATION: The Dorsey Tactical Market Sentiment registered a rare 99% Bullish on 3/2. The decline into new lows on 3/27 was dramatic but stocks recovered during the trading session and closed well off of the extreme levels of the day. I mentioned last week: “Still that day and thus, the 2322 level represents a, “Shadow Sentiment extreme.” I wanted to explain this a bit more and I have put 2 red circles on the sentiment chart: One on 3/27 and one on 4/5. In both of those cases, the market had dramatic moves in one direction which were then reversed. Thus, the end of day (EOD) sentiment did not reflect the emotional extreme that actually occurred during the day. Thus they are, “Shadow Sentiment Extremes.” I note them but they only show up as shadows. Still they represent technical micro tells of support and resistance. Thus, the 2322 level on 3/27 and yesterday’s high at 2378 are important. This has to do with the EMA and may be discussed in an upcoming video report.
The DORSEY Intermediate Market Sentiment deteriorated back to levels commensurate with prior trading lows and has bounced, as expected. Sentiment is now more or less neutral but given the timing profile allows for some disappointment from now into Dates are for members only-subscribe now 50%
MARKET SUMMARY: A trading Top occurred on 3/1. The Low on 3/27 remains tactically cogent. Thus, 2322ish becomes important Support. The next Timing low is still due near Dates are for members only-subscribe now 50% That profile is still best interpreted as, “the market undergoing a choppy Range Congestion.” That makes it difficult to trade which is exactly what we have been seeing. It remains way too early to obsess on the coming crash which is due much later on in the larger market cycle.
TECHNICAL VIEW by Gary Dean: The bulls need to push the spx above 2361 resistance zone for a reaction trade up to 2366-2377. The bears need to push the spx below 2350 for a reaction trade down to 2344-2336
- Short Term Support- Below 2350 is earliest clue 2344/2336 may come into play-below 2336, then 2322 will become a target
- Resistance Levels: 2361-2366-2377
The ABC pattern I have been following is still very much in tact. Yesterday’s reversal at resistance should mark the top of wave B and now we are in the beginning stages of wave C down. Targets would be anywhere from 2300-2280, but as we approach, we will have a better idea–if this is the pattern in play. The bearish divergences on the 60’s gave a good clue that a top was pending and the short term oversold momentum from yesterday’s drop is providing a reflex bounce today. It should fail below yesterday’s highs–2361-2366 looks like strong resistance if it gets up there.
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.
The important take away from the chart below-are the bearish divergences on all time frames. Momentum is oversold on the short term charts-so thus bounce makes sense.