MARKET ENVIRONMENT: by Woody Dorsey. Sentiment came in today at @ 23% Bullish. The 0% sentiment reading on 6/14 was a good trading low. Stocks became frothy and are trying to work out a reversal. Noted: There is the possibility for surprising hiccups towards month end and even into October. Good news is suspicious.
NEAR TERM: High sentiment remains suspect. The path of least resistance is beginning to become for lower rather than higher prices.
INTERIM TERM: There is a potential low coming up in October. Interim profiles also suggest that the best low of the year may not occur until the fourth quarter. Remain wary. There are still plenty of Unknowns in this Market.
DORSEY MARKET SENTIMENT: The 0% on 6/14 bullish was a classic Sentiment low. Sentiment has now rallied back up towards relatively high levels of optimism. This, another sentiment decline may be likely from here.
MARKET SUMMARY: Repeat: “Equity Markets remain under secular corrective pressure.” The wonderful bounce is tired. This is not a Market to believe in. An interim buy zone is shaping up for October. Stay careful.
TECHNICAL VIEW by Gary Dean: The topping process continues as the rate of changed has peaked and sell signals are in place. But remember, topping is a process. The bulls will continue to buy the dips and press the tape higher until it doesn’t work. Then they turn into panic sellers. I like our entry at 4310/4320 and so far, the 4322 was the exact top. I do believe it will not be easy to coast through that resistance line. But until the bears can get price below the 4180 support, the bulls will hang around.
The bulls stepped in right at the bottom of the bearish wedge pattern. The 4240 support needs to be taking out to see any downside momentum pick up. I would think the sell signals we are seeing would generate a little more on the downside. For the short entry at 4320/4310, keep stops at either entry or above 4330. Your call.
The smaller wedge was broken to the downside, but no major support levels have been taken out and until the bears get price below 4240, the bulls will remain in control.
Summary: The safest way to trade this market is to short rallies-THAT HAS NOT CHANGED! The bulls have defended support levels and until that changes, they will try higher. The preferred pattern is for a test of the 4200 support and in case it doesn’t, limit risk to none or very minor loss. We are in a topping process, which may take a few tries down before one sticking. G
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