MARKET ENVIRONMENT: by Woody Dorsey. Markets are obvious now. This is how trends happen. Sentiment came in today at @ 17% Bullish. The 98% Bullish on 8/11 signaled an optimistic extreme. The 0% reading on 8/29 signaled a new wave of negativity. The trading trend is still down. The market is showing itself. This could be a wishy washy week!
NEAR TERM: Profile from last week: “The path of least resistance is for lower prices. Here we are. Here we go.” No special bias this week so let stocks just wear themselves out trying to prove anything.
INTERIM TERM: No change: “A potential low coming up in October. Remain wary.”
DORSEY MARKET SENTIMENT: As advised: “Another sentiment decline is likely from here.” The 0% reading on 8/28 represented a new sentiment impulse down. The sentiment profile suggested that a negative nadir is not due until later this Fall. Sentiment is obviously deteriorating but does not show any sign of an extreme yet.
MARKET SUMMARY: Repeat: “Equity Markets remain under secular corrective pressure. This is not a Market to believe in. An interim buy zone is not profiled until October.”
TECHNICAL VIEW by Gary Dean: The bulls had everything on their side heading into Friday and we saw how weak they really are. Without the backstop of the Fed, this market is not safe to buy and hold. We will get massive bounces that can last weeks/month, but no important resistance should be taken out with these bounces. And with that said, I would be very careful shorting here and will almost come out with wait for a nice bounce to short.
There are NYAD buy signals, sentiment is in the tank as well as momentum buy signals. From that view, anyone would be thinking long. But one thing we have to keep in mind, September/October were always scheduled to be tough months for the bulls. And when downside momentum picks up, often these buy signals get wiped out as panic selling hits. Waiting for more information before trading is highly recommended. On the daily chart below, I have labeled the bullish/bearish wave count.
The bearish wedge target was hit and there are buy signals in place. They may be ignored and we head lower with panic selling, but without a technical reason to short, I will watch and wait for the next set up-short/long. The bulls need to get price above the 4016 highs for a reaction trade up to 4080-/4100
There is what’s looking like a back test of the bullish wedge. If the bulls can work off of this and get price back above 3950, they get some momentum to make a run for the 4016.
Summary: The safest way to trade this market is to short rallies-THAT HAS NOT CHANGED! The bulls gave it a go Thursday/Friday, but in the end, the bears just slapped them back down at resistance with very little effort. I would not be shorting right now because of the buy signals. I am a little hesitant about buying, so I will wait and see if we get a bounce to short. G
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