MARKET ENVIRONMENT: by Woody Dorsey.
Again my overall advice remains: “It is not the time to be very aggressive.” Stocks really are predictable…some of the time. It is a secret. So, don’t tell anyone. Don’t distract them from calculating their 221 day moving average or figuring out what the FED minutes really mean.
The Trend is not always your friend. Maturing trends are not, “Friendly.” They can seem invincible and then suddenly fall apart! From last week: “ALERT: I want to share with you that the pattern due on 6/26-27 which does hold very specific RISK.” Now, flat for the holiday. Thank you.
- Near Term Diagnosis: Sentiment is 1% Bullish today.
- Interim Term Diagnosis: Key downside support remains near 2600. I expected another “Buy the Dip.” I expected “another upside spurt beginning in early July.” Now we will see if the interim trend is really broken or not. I prefer more upside tries in the first part of July.
- Long Term Diagnosis: Stocks are in a topping process but that Top has not yet been defined.
- 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: There has been a profile for “quick declines near the profiled dates, particularly 6/26ish. I said that a specific negative energy or, Prana was due over the last 2 days so I am not at all surprised by the market. Traders don’t like the Reality of what is happening. They have their own notion of what “Should” be happening. After all, who wants to embrace this “uncertain whimpering?” Yes, the Earth is not flat and markets really are predictable… some of the time.” I advised that “the last week of June has a negative indicant and that the, first 2 weeks of July are nominally positive.” That profile has not changed at all. Again, “from a trader’s perspective, the bigger picture does not matter.” Now, with week, month and quarter end looming in front of a Holiday week, it fits to have some bounces or “uncertain whimpering” from near here. Prefer a recovery into 7/9-10. Observe the current “uncertain whimpering!”
SENTIMENT INTERPRETATION: The Dorsey Tactical Market Sentiment registered a 97% Bullish on 6/7 which actually stopped much of the upside persistence. Now we are registering 1% and 3% Bullish readings just when a timing low is due. This looks like a typical flush but, as always there can be more pessimism before a sure turn.
The DORSEY Intermediate Market Sentiment was showing signs of Vulnerability. I noted it was finally “beginning to decline towards lower levels but I would still give it more time.” Now, it has broken down towards the bottom of its channel and may be bottoming in alignment with the timing profile. If it were too decline much more drastically, it might signal that the sentiment recovery channel from early April is over.
MARKET SUMMARY: The Stock Market is having a wonderful virulent correction, as expected. This is in alignment with the preferred pattern and still allows, but does not promise, a “Dip” which may produce another trading rally attempt in July. I would still advise covering your short bias and giving the market until at least next week’s trading activity to better determine what the context of this decline infers. Again, “Thank you, Mr. Market…for all the wonderful behavior.”
TECHNICAL VIEW by Gary Dean: The short trigger from 2778 worked well and now it is time to start buying dips or staying in cash position. As Woody mentioned, it is NOT the time to get aggressive, so you trade smaller lots. The failed attempts higher/lower are often used to lore in the retail public to get aggressive on the wrong side. Our predictive analytics model…Time-Sentiment and Technicals are all looking higher. It may take a few tries for a rally attempt to stick and we may need to go lower before it happens. But I believe the support levels below will provide some type of short covering bounce in the coming hours/days. Bullish divergences are in place-support levels are 2690-2683 and 2677/2670
The 15 minute charts are showing bullish divergences as well, but the bulls have some resistance levels they need to get through to make it to the bull/bear zone 2738/2742. Resistance levels to watch: 2715-2723 and 2733.
No changes on the daily pattern. Once the bears pushed the spx below the short term bull/bear line at 2742, it made a quick drop to test the daily bull/bear line at 2700. I see no benefit in trying to figure out the long term pattern, just trade the intermediate term support/resistance lines.
Summary: There are bullish divergences on the 15’s and 60’s, but the bulls are having some issues getting traction pushing price higher. If we need lower, I am expecting the 2683-2677/2670 support zone to hold. If the bulls can get the spx above 2722, then we could see a test of the bull/bear zone 2738-2742.
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