MARKET ENVIRONMENT: by Woody Dorsey. Sentiment came in today at @ 28% Bullish. The two 0% Bullish over the last few weeks did resolve into upside relief. Again: “Those readings may be telling of a temporary low. It looks like more recovery by fits and starts.” Still, Structural Tightening in Financial culture will continue for years, even on the scale of Decades. Enjoy some temporary rally relief.
NEAR TERM: The FOMC has been nominally discounted but Recession issues may not have been. From last week: “I like the idea of a temporary low to be put in place soon.” Yes, but it won’t be easy and volatility will continue. But, markets are simmering.
INTERIM TERM: The Interim profile still suggests a better low in the fourth quarter. The market may keep toying with us all Summer. Be careful trying to game any trends. They may only be a few days at a time.
DORSEY MARKET SENTIMENT: Sentiment was overly optimistic for many years, even decades. Now: This is a different era. The Clusters of very low sentiment ‘told’ that a significant Recognition occurred. As noted: “The double 0% sentiment may be enough for a temporary bottom.” You can see on both of the sentiment charts that an impulse higher has been generated. So, expect more lawful upside recoverins.
MARKET SUMMARY: Repeat: “Equity Markets remain under secular pressure. Central Bankers will be grappling with Inflation for a long long time.” Volatility and Uncertainty will continue. To repeat: “Some bounces are fine and good. Another leg down is due into year end.” Wars never end well, nor will, 2022. Take it easy.
TECHNICAL VIEW by Gary Dean: The NYAD is throwing out a beginning stages bearish divergences. I say beginning, because we may see a more defined divergences if we see another new rally high. But it is starting to throw out warning signs about jumping on the Bull-Band -Wagon blindly. We could turn anywhere here and it would make sense. My preferred pattern remains that 4200/4300 will come into play before this top is in place. The safest trade is to wait for the bulls to exhaust themselves and squeeze the last bear and short at resistance pivots.
Not much that has really changed on the long term front. We had bullish divergences at the lows and have seen the bulls sling shot the spx off of those lows. The two 0% bullish sentiment readings supported the preferred pattern for a tradable low. Now we should see 4270-ish come into play, where I do believe sellers will be waiting. This is being viewed as just a dead cat bounce and the stronger direction will remain lower throughout 2022.
The 4200 pattern target may become a magnet before a quick break to the downside. There are some bearish divergences that formed and that had me expecting some backing and filling to the downside before we see the bulls try higher again. Here we are! The bears need to get price below the 4092/4062 support zone to see a reaction trade down to the 3982 support. That is the important level for the bears to breech. I still like looking for support pivots to get long for now. A breech of 3982 would change my mind.
The inverted head/shoulders pattern was triggered and I am looking at n upside target between 4200/4270. There were sell signals on the 15’sand the expectations of some backing and filling to the downside is playing out. 4062 is important for the bulls to defend.
Summary: The safest way to trade this market is to short rallies-THAT HAS NOT CHANGED! There were sell signals on the 15’s/60’s which had me looking for some selling short term. Here we are! Watch the 4200/4270 resistance zone, sellers should be waiting there. The bulls will remain in charge of short term direction until the bears can get the spx below the 3980 support. G
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