10/26/23 Sentiment Timing Report

A Semiotics Approach to Markets

MARKET ENVIRONMENT: by Woody Dorsey. The ongoing situation in the financial world is quite complex and uncertain. We find ourselves in a volatile and vulnerable market environment, characterized by a series of events that have added to the confusion. One major concern is the impact of recent conflicts, like the situation in Gaza, which has only added to the unpredictability of the market. These events, coupled with a lack of clarity in the U.S. government, have left investors cautious and reluctant to make any significant moves.

Market conditions are far from ideal, with various factors contributing to the uncertainty. Inflation is a growing concern, and the Federal Reserve’s tightening measures are further complicating the landscape. This uncertainty has given rise to what some might call a “bull market in uncertainty,” where investors are unsure about the direction the market will take. While there is a general interest in various assets, there is no clear bullish trend to follow. The prevailing sentiment remains very cautious, coming in at 4% yesterday. Don’t get too bearish here. Traders are getting washed out. Use extreme bearish views as an opportunity to start buying. It’s a challenging period, and while some may attempt to forecast the future, the reality is that the market remains enigmatic and difficult to predict. The key message here is to tread carefully, remain patient, and prepare for a market that may continue to struggle for the near term.

  Again, there is no pain like champagne and no dough like Bordeaux! Markets are a strange brew. So, live well and drink well!  Markets are fleeting.  Trade and tread lightly. As I expected, interest rates will be rising for decades!  Large cycles are at work. It is bullish for all manner of stuff.  As noted, Gold may be golden! It keeps stocks messy. Stocks are like the ‘lost decade’ of the seventies? This is not any easy time. Yet it will all eventually resolve into an explosion of higher prices in a vindication of the reality of inflation. Cheers.

NEAR TERM: Investors are still obsessing over potential big picture market moves which are surely still not happening. The INTERIM TERM PROFILE is quizzical but may eventually become a rally profile. It is also possible that more of the same rangy trade may yet occur?  Wars are never good. This market is still just a mess. Don’t believe in it. Treading water is a normal way to swim. That is where we are.

DORSEY MARKET SENTIMENT:  4%  of The Herd on the Street is relatively bummed out by the war and such. The optimism that emerged earlier this year resulted in a positive peak during the summer months. However, this optimistic outlook has been reversed due to a sense of complacency and confusion in the market. We currently find ourselves in a state of uncertainty. To make matters more challenging, negative scenarios continue to present themselves. The recent policy of monetary tightening is creating an unfavorable environment for various assets. It’s essential not to adopt a simplistic bullish or bearish stance, as strong convictions in such a turbulent market can be perilous. The market remains indecisive, and it has yet to provide clear signals. Furthermore, inflation is gaining momentum, which may lead to a prolonged period of uncertainty. In addition, the market’s overall pattern presents arguments for a slowly emerging bearish possibility. In essence, this is not a healthy market environment.

MARKET SUMMARY: Repeat: “This is not an Environment in which to try out any extreme Market Beliefs.” Markets remain in a Tightening tight rope. Higher rates are at work in this messy game. Play it only by not really believing in any clear resolution of it. The market does not want to let you understand what it is trying to do. It does not even quite understand itself.  Everyone is trying to get it all just, so right. Don’t fall into that trap. Don’t be swayed by all of the tactical crap and Choppiness. Don’t be afraid of any trial rally flings or of any scary trial declines. It is normal for money to keep trying to find ways to get itself into higher strategies. Don’t follow any of the leaders. This is still a vulnerable period and a tricky phase. Inflation is the real long game here.  Money is sloppy and afraid all around. This is typical of a real market mess. Some sort of a low is in place but may not mean that much. Nothing to do but suffer through this time. Don’t get whipped up by any of the whipsaws. Expect them.

TECHNICAL VIEW by Gary Dean:  The cash trade was the correct call for some time. Yes, one could have made great trades, but I am yet to read anybody who can go from bullish to bearish in a matter of a day. And that is how fast you have to be. Just last week, the talking heads were asking AGAIN, is the start of a new bull market? Now the bears are all giggly about the price action, hoping this is the start of the bear market they have been hoping for. I have said this many times–who cares!! Just take the 100-300 point SPX gain and move on and wait for the next trade set up. By the time either side is correct (bull/bear market) we will be 900-1400+ spx points ahead of them.

The weekly channel broken to the downside, but the bulls TRIED to get back inside and obviously failed. If we see a clean break and continuation lower, then the secondary channel will be in play, which has a downside target near the 3900-ish area. I see that larger channel playing out in 2024, not now. Too much bearishness out there-stocks have been hammered and nobody can imagine why the market will go higher. This is typically when a low is made, whether that be this week or next week, I do see a rally/bounce coming.

Short Term Wave 5’s: The spx looks like it is trading within a bullish falling wedge. Notice, even with the big down days yesterdays and today, there are buy signals on the 15’s. We should see that if we are going to continue down hard. A break of 4188, should trigger some shorts to cover. The pattern target is between 4330/4400.

The daily chart is showing buy signals and we are near some important support between 4100/4035. The SPX has to decouple from the ILL NASDAQ and start following the Dow, which has held up much better. Right now, the bulls HAVE to get price back above the 4200 line to see a reaction trade up to 4300.

There are buy signals on the 60’s, which now has buy signals on the 15’s-60’s and daily. The ball is in the bulls court and it won’t take much to ignite a nice bounce/rally. The geopolitical tension is a very heavy weight on the bulls back right now. But it is trading right in the support zone, so maybe we have some buyers waiting? Stay small with trades and stay patient.

Summary:  The overseas geopolitical tension has this market handcuffed. If it was just contained, it would not be an issue. But the chirping out of Iran and ground attack immanent, nobody wants to stick their neck out. I am long 1/3 at 4160 and will wait patiently until the dust settles to add to that position. G

Information is for paid subscribers & may not be copied or distributed. © Copyright 2023. The information contained herein was provided by  Sentiment Timing and/or its publishers does not make any representation or warrant with regard hereto, including but not limited to those of accuracy, completeness, reliability, timeliness and/or infringement on the rights of third parties. This Publication expresses a view on the markets but is not intended to provide any specific recommendation to buy or sell any security. Investing is Uncertain and always carries Risk. Of Losses. Subscribers should always assess Market Risk parameters with their broker or financial adviser.

Information is for paid customers and may not be copied or distributed Copyright 2023