MARKET POINTS: by Woody Dorsey
I repeat: “Do not Believe in this Market.” This Aura of: “Good News, New Highs and High Sentiment,” is typical of a Golden Halo (GH) formation. Moreover, stocks have entered a “Twilight Zone.” That means that the topping process is both very mature and very strange. Yes, it is very difficult to remain patient here. One of the most difficult phases in any market is to, “Wait for the completion of a price pattern!”
- Near Term Diagnosis: Sentiment came in at 67% Bullish today. It was 36% yesterday. This sort of sloppy sentiment is most typical of consolidations. I want to alert you that I am seeing a micro pattern of strong Fridays which are reversed early in the following week. We may see that again on Friday/Monday
- Interim Term Diagnosis: A Golden Halo (GH) is forming. Repeat: “There are better negative indicants in a month or so. Thus, the topping process may stay stodgy for now.” It has indeed turned sideways and may continue like this for maybe a few weeks.
- Long Term Diagnosis: The TrumpTop will result in an “important decline.” However, as I have noted for weeks: “That is not necessarily a reason to be aggressively negative.” Not yet!!! Corrections are a normal process which usually begin slowly.
- QUESTIONS ANYONE? Client questions. 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 next nominal tactical low is due near 6/15. That may be followed by an upside flurry into 6/20-23. Better negative indicants are coming in July and much better ones in the following month.
SENTIMENT INTERPRETATION: The Dorsey Tactical Market Sentiment registered 97% and 95% bullish readings on 6/2 and 6/5 respectively. That did stop the upside but has not generated any decent downside. Recent sentiment behavior may be reminiscent of the 99% Bullish reading on 3/1 which led to a 6 week correction. From a sentiment perspective, this is not a good time to be buying but an absolute emotional reversal has not yet occurred either. For that to happen, it would be ideal to get Negative sentiment on some New bad News. In its absence, the eerie twilight zone may continue.
The DORSEY Intermediate Market Sentiment is still cresting and potentially diverging. However, “I allow that this Twilight Zone topping process may continue for a while longer.” Thus sentiment may just flatten out here and begin to slowly roll over.
MARKET SUMMARY: Stocks remain in a Golden Halo (GH) topping formation which does not appear to be complete. At least, it is not confirmed. This is a “Twilight Zone (TZ).” Until stocks really reverse, the investing public and the punditry will stick with their optimistic shtick. Don’t be complacent but don’t become impatient.
TECHNICAL VIEW by Gary Dean: The wave pattern has not changed. I continue to wait for this last wave structure to unfold before we see a more meaningful drop/pullback. The expected weakness should just mark the BEGINNING of the expected weakness. But we have to keep in mind, tops are rounded. So whatever high that is made-has above average odds of being tested again. But first, we have to determine where the top is in.
There are ENOUGH waves to count this complete, but until price reacts to the downside-the door has to be left open that it MAY not be in place. We need to see the bears push the SPX below the 2400 marker to become more confident that the top is in for now. Whether or not we made the high or not, at this stage of the wave structure, you can not become complacent.
The bulls need to push the spx above the 2436 level to stretch for the 2440/2448 resistance pivots. If the bears can push the spx below 2424-we could see a reaction trade down to the 2418, which I believe is the bull/bear momo line. Below 2418, we could see 2404 is a fast manner.
The internals continue to diverge from the SPX-and that has not changed. But until the bears can push the SPX below 2400-these divergences will continue.
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