05/19/22 Sentiment Timing Report

MARKET ENVIRONMENTby Woody Dorsey. Sentiment came in at @ 0% Bullish. There have now been two 0% Bullish in the last 2 weeks. Individual readings are not very telling right now. No change: “Structural Tightening in Financial culture will continue for years. Hyperinflation is Real. It is prudent to be cautious. Most investors have only seen Bears in zoos! This is the real thing. This Market situation is on the scale of Decades. The surprise may remain how virulent and persistent declines are into Q4.

NEAR TERM: Fears about the FOMC is being nominally discounted? Tightening is here to stay for years. This is a Market War so, stay Wary. There is still not a near term road map in this terrain. Stay off road. Stay in 4 wheel drive. Take each day as it comes.

INTERIM TERM: The Interim profile suggests a low late in the fourth quarter. There is nothing bullish about this market. There may not be much in the way of any easy Summer rallies to sell into.

DORSEY MARKET SENTIMENT: Sentiment was overly optimistic for many years, even decades. That has changed. This is a different era. Clusters of very low sentiment are ‘telling’ that a significant Recognition in the investor psyche is occurring. Individual sentiment extremes are not enough to identify trades right now.

MARKET SUMMARY: Repeat: “Equity Markets remain under secular pressure. Central Bankers will be grappling with Hyperinflation for longer than anyone thinks.”  Volatility and Uncertainty aren’t going away.  There will be another leg down into year end. Wars never end well, nor will, 2022.

TECHNICAL VIEW by Gary Dean: As long as we have volatility, our predictive analytics model will work wonderfully. The trend is obviously down and the pattern has been sell hard, followed by a 1-3 day rally for 100-300 spx points. Then it’s back to sell hard. This pattern will change, it is more of a matter of when? Do we need another 10%-20%-50% down before it changes? That is tough to say, because this administration is doing NOTHING to combat inflation and the Fed is trapped.  Short term, I am still believing that shorting after big drops like we saw yesterday is dangerous. These face ripping short squeezes are scary to be on the wrong side of.  Sentiment is quite bearish again and the 3856 low held-so far. So short term, I would be careful and not get aggressive shorting down here. A bounce that last more than a few hours/days is due to hit any time. Just not sure what would spark that rally?

The bullish divergences did cause a 200+ rally, but the time piece has not changed-they only last 1-3 days. The breakdown support lies at 3856 and if taken out, we should see 3750/3720 come in a fast manner. The bulls need to get price above the 3982 to see momentum pick up and a stretch back up to 4092. I still think we are making some type of short term low in this area.

The range is pretty clear. The bulls need to get price above 3984 to see momentum pick up with a reaction trade up to 4090. The bears need to get price back below the 3856 to see selling momentum really pick up-maybe in panic style?

Summary:   The  safest way to trade this market is to short rallies-THAT HAS NOT CHANGED! The 3 days up followed by hard selling continues. I still believe we are trying to scrape out a short term low down here. 3856 support is key and if taken out, we should see 3750/3720 pretty quickly. But until the bulls can get price back above 3980, the bears will continue to try and press the price lower. G

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