MARKET ENVIRONMENT: by Woody Dorsey. Sentiment came in today at @ 57% Bullish. The 0% sentiment reading on 6/14 still represents a good trading low for now. This market remains dangerous. There are dates later on for real lows if anyone cares but you don’t really need to know that yet.
NEAR TERM: This tactical recovery might last towards the end of July before the next cliff jump.
INTERIM TERM: The Interim profile still suggests that a durable low may not occur until the fourth quarter. Remain wary. Don’t Believe that you understand the Risks.
DORSEY MARKET SENTIMENT: Sentiment has been overly optimistic for decades. But: “The 0% bullish “told” of a low. This is Typical bouncing behavior. Sentiment is still at risk of eventually going down to again importantly to a more real reality later in the year.
MARKET SUMMARY: Repeat: “Equity Markets remain under secular corrective pressure. Wars never end well, nor will, 2022. Bounces may be expected for up to weeks B4 another cliff appears.
TECHNICAL VIEW by Gary Dean: The battle has ended with the bulls breaking through the 3836 top range/resistance. We have seen momentum pick up on the long side, but there is resistance right here (3895) The entry off the 200 week MA, which was combined with 0% bullish sentiment and buy signals remains an easy trade. Nothing has changed from a bigger picture view. The safest trade is to wait for the bulls to wear themselves out, force the last bear to cover and short that rip. Right now, too many peeps are looking where to short, which gives the bulls some fighting chance to get to the 4000/4100 targets.
Once everyone believes the lows are in and the talking heads start pointing out “if you got long at 3640 (like we did) you missed 400-500 spx points already” Yes, once I start seeing that, then we start looking for where to short. These same guys were saying not to try and catch a falling knife at the lows. They are Monday morning quarterbacks. They don’t foresee/predict lows and highs before they come, they just react. Maybe they should start reading sentiment timing. The ABC pattern I pointed out near the secondary lows, looks to be getting more traction, for now!
There was bullish divergences as we approached support and the bulls stepped in. Something we haven’t seen for a while. My preferred pattern in we are in the wave C up to the 4000/4100. I will adjust if needed, but enjoy the ride with stop at entry for the remaining 1/3 open. The 3895 is important for the bears to defend. The consequences if they lose that battle, we will see a buy program/short squeeze up to the 3955-ish .
The smaller range that was in play (3836 top and 3740 bottom) saw the bulls win that battle. The next test should come at the 3955-ish highs, but as I pointed out above, the bulls need to get above the current resistance at 3895. I am not seeing any immediate warning signals, so they do have a chance here.
Summary: The safest way to trade this market is to short rallies-THAT HAS NOT CHANGED! The small range was broken out to the upside, but the bulls are running into ma resistance right near the 3895 line. Expect a short squeeze if they can get above up to the 3950-ish resistance. I see the bulls remaining in charge of short term tape until we see the 3832 line taken out. Leave or raise stops and don’t be too quick to short here. G
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