Summary of this report–Market Bias: Bullish–looking for a low on 06/27-ish and then for a rally into into 7/9-10. The SPX made a low on 06/28 and has rallied 50 and the top came in on 07/10!!
MARKET ENVIRONMENT: by Woody Dorsey.
The micro tell from the low on 5/3 was that, “an uptrend might persist for some time.” Stocks are having some expected tactical setbacks into the forecast Low dates. Again my overall advice remains: “It is not the time to be very aggressive.” Remember, the market is always perfect. It can only do what it does which is usually quite different than our expectations.
The Trend is not always your friend. In fact, towards the end of maturing up trends, markets are weirdly but not necessarily, profitably bid. Maturing trends are not, “Friendly.” They can be up but also be excruciating and then suddenly fall apart! ALERT: I want to share with you that the pattern due on 6/26-27 which I have already told you about does hold very specific RISK.I would avoid being complacent into there. Maybe it will be blah, but be warned.
- Near Term Diagnosis: Sentiment is 65% Bullish today based on yesterday’s modestly recovery into the close.
- Interim Term Diagnosis: Key downside support remains near 2600 and an upwardly sloping market trend has been modestly operative. The preferred interim view from weeks ago: “argues for a look at new highs in the weeks ahead. But stocks will likely flatten out and take some time to develop a more defined topping configuration.” The entire interim pattern depends on if this forecast trading decline tunes into a “Buy the Dip” or not. It needs to break wide one and really reverse or it will indeed try another upside spurt beginning in early July.
- Long Term Diagnosis: No Change: “Stocks are in a topping process that has no absolute definition as yet.” I am watching for the trigger.
- QUESTIONS ANYONE? No client questions today
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 profile was for an “early May” Low. That 5/3 Low remains as an important micro tell which projected trending, which more or less lasted into the 97% Bullish reading. As noted: “The next low dates remain near 6/20 and 6/26. There is still the potential for quick declines near the profiled dates, particularly 6/26ish.” What I continue to wrestle with are the next High dates. I shared that the last week of June has a negative indicant and the first weeks of July are nominally positive.” Now, a bigger negative trigger can be generated at any time but stocks have, so are, acted like they will try to push on again later this Summer. XXXXX trading behavior and levels will be telling. Still, from a trader’s perspective, the bigger picture matters not. There is still some downside potential, near term.
SENTIMENT INTERPRETATION: The Dorsey Tactical Market Sentiment registered a 97% Bullish on 6/7 which actually stopped much of the upside persistence. I advised, “There is no reason to chase the long side.” Stocks pressed on a bit, they really did nothing and now they are lower! There has not been any really juicy Low sentiment because stocks have closed well on every break. That may change into quarter end.
The DORSEY Intermediate Market Sentiment has been in a nominally trending recovery. But, “Vulnerability has been building. Sentiment could reverse at any time given this historic environment.” It is beginning to decline towards lower levels but I would still give it more time.
MARKET SUMMARY: The Stock Market is having the expected correction. It is still not clear how big it is or the interim context. The pattern still prefers but does not promise that: “A “Dip” will likely produce another trading rally attempt in July.” Don’t’ become complacent. Everyone else is. Thank you, Mr. Market…for all the good times.
TECHNICAL VIEW by Gary Dean: The SPX has been trading within a large range-2776 high and 2743 low. So far, these boundaries. I continue to believe it will break to the downside, but until it does, we are still range bound. If the bears can push the spx below 2743, then I can see downside momentum picking up and 2700 coming into play in a fast manner. The bearish wedge target remains around the 2650-ish area. As long as the bears hold the spx below 2776, they remain in control of the short term direction.
The spx continues to test the bull/bear support zone 2742-2738 and that is what the bears need to push through to get some downside momentum going. The bounce from Tuesday into Wednesday produced some bearish divergences which are most likely being played out today. Until the bears push through the bull/bear support zone, we could remain in a choppy environment.
No changes on the daily. The spx is trading closer to the top of the larger range with some bearish divergences forming on the momentum indicator. If they are going to try for the top of the range, 2800 would be the area I expect sellers to be waiting.
Summary: The spx is trading within a range and until it breaks through, everything else is just noise. If the bears can hold the spx below 2764 today and sellers show up in that area, then I believe the 2743/2738 support zone will be taken out. If the bulls push above 2764, then we will most likely see 2774 before the next move lower. This is going to break one way or the other-I prefer the downside, but we need to see selling momentum pick up. G-
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