Market Environment: Neutral-Looking for a low
- Short Term Sentiment: Market Bullish
- Intermediate Term Sentiment: Neutral
- Timing Profile date: October 6th-9th Market low
- Technical Indicators: Oversold
MARKET POINTS: by Woody Dorsey
- The Price Highs (Golden Halos) on 5/20, 6/22 and 7/20 traced out a Significant Distribution Top. The 94% Bullish on 8/11 identified the 2105ish area as the onset of the projected “Kill Zone” which segued into a “Crashlet” on 8/24. Expected bounces from there occurred into 9/17 (Golden Halo.) As I noted: “The market became simple after 9/17: Sell with a stop at 2020.” The decline on 9/28 generated a 1% Bullish Dorsey Sentiment Reading. It made obvious market sense for a Rebound from that 1% and the 8/24 retest. But the Low on 9/29 was not a perfect Sentiment/Timing/Technical configuration. Still stocks are in a basing and probing phase which is not so simple to diagnose. The easy money has been made.
- Markets remain in a somewhat amorphous “Black Hole” environment which typically provides a Deflationary aroma. That is exactly what occurred recently: Global Commodity Declines (very well advertised) in concert with generic Global Equity declines. The Dorsey Code still allows for some turbulence and uncomfortable backing and filling.
- I noted in early August that the “Kill Zone” would be followed by “Black Holes” this Fall. That idea was a cogent and prescient indication of what might and indeed did occur. Again, it has ever been my intent to provide exact dates or explanations of these “Black Hole” phenomena. They provided some wonderful trades. I note again that the Black Hole last October was much simpler in nature and provide a “Dip” to buy in an ongoing Bull Market. This is a different and more complex market configuration.
- As noted: “I continue to watch Energy and EEM for, any tells of a Low. Crude may have already bottomed. This does not mean it is a Buy or that it is going much higher any time soon.” Crude and EEM have held in which offers some support for the idea of a looming generic low in Commodities.
- Repeat: The greatest declines often occur near the end of a move and can happen, “very quickly.” This has been “the ideal time for that. The next trading low remains due near 10/6ish. There is not nor has there ever been an indication of a plunge there or a new low or a higher low. The profile simy says that, “weakness is due” into there. Fridays Jobs Data may weigh on the market this week.
MARKET TIMING: The emerging “Dorsey Market Code” is somewhat complex here. Timing inferences are always changing. That is why I advise: “Don’t become overly anchored on any one Date or on any particular Price Level. The near term profile remains for “weakness into 10/6.” The “Dorsey Code,” suggests a zone from 10/6-10/9 with specific potential bottoming (at any level) on 10/6 and/or 10/9. If there is an identifiable Low there, it would set up a dynamic short-covering Rally.
There is still the potential for some weakness perhaps as late as early November but that may only be a place to Buy.” Thus a surprising Uptrade followed by another Downtrade could occur and be very confusing for the Market Majority. This market profile was always deemed to be “notoriously difficult to parse.” Indeed it is but it is also a great trading market.
TIMING SUMMARY: The Recovery Rally into 9/17 was a significant Trading Top. The expected down trade from there is mature but is not definitely complete. The next month may be turbulent, both ways.
SENTIMENT INTERPRETATION: The DORSEY Market Sentiment registered 94% Bullish on 8/11 near S&P 2105ish. The 0% Bullish Reading near 8/25ish identified 1870ish as Key Support. Stocks bounced and registered High Sentiment on 9/17 @ 2020ish. The debacle on 9/28 generated a 1% Bullish which allowed for some bounces.
The DORSEY Intermediate Market peaked near the 7/20 High. Negative Sentiment around the 8/24 Low was neutralized by the Sentiment Recovery into 9/17. Interim Sentiment declined again and is near low levels once again.
SENTIMENT SUMMARY: The Summer Sentiment Profile argued: “Stocks have the opportunity to, can, and will break down.” Extreme Sentiment Readings identified a Low near 8/25ish and a High near 9/17. The recent 1% Bullish was the “best” Negativity seen since the 8/24 lows. Yes, Sentiment is getting “low” again but has not given any cohesive indication.
OVERALL MARKET SUMMARY: Equities had a significant Summer Topping Process. A secondary Corrective phase began on 9/17 and seems to be in a culmination process but it is not well-defined, yet. After we see the trade into 10/6ish, the next short covering rally may unfold.
TECHNICAL VIEW by Gary Dean: The SPX had a nice rally right into heavy resistance, which has pushed it back down-so far. There are bearish divergences on the 15 minute charts, but not on the 60’s. Breaking down from here makes sense, but if the bulls decide to try higher again, there is still a lot more resistance above. If the markets cooperate and head lower, then we can keep an eye on the 1865-1820-1788 target areas.
Nothing is certain, but the above support levels fit the profile and make the most sense for now. The bears need to push the SPX below 1895 to get downside momentum going. That is the first real important support and if lost, it would send a serious signal that the lows will be tested and have a high probability of being broken. If new lows are made-be aware, there will be daily buy signals and as Woody mentioned, could trigger a nice short squeeze rally-especially heading into the important low timing profiles.
Resistance Levels-1929-1935-outsider 1945
Support Levels: 1895-1866 outsider 1820
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