MARKET ENVIRONMENT: by Woody Dorsey. Sentiment is coming in today @ 53% Bullish. Stocks seem Happy but are Heavy.
NEAR TERM: It really is the end of the year. The 96% Bullish on 12/28 was excessive. The micro trading profiles remain acute, annoying and likely unimportant, in the near term? I saw upside from 12/20 into here. Now a downside option is brewing. into 1/13 and then into February/March with June being recovery time. It is a Two Way street.
MARKET SUMMARY: Equity deterioration is due to reassert itself. Weakness remains due into February/March 2022. As expected, Inflation
may provide a two way market that no one expects. Hyperinflation will happen this year. It will be very bullish for some assets. Interesting Times.
Trading Instrument (Gary Uses) My Trading Instruments are all based off of SPX numbers, but for long side trades I use (SSO) the 2x leveraged etf that follows the S&P 500 and when expecting the market to move lower, I use (SDS) the 2x leveraged etf that follows the S&P 500, it moves higher when spx moves lower.
TECHNICAL VIEW by Gary Dean: The bulls didn’t let anyone down with the Santa Rally. We were warning at the lows, not to get too bearish and I was still expecting a Santa Rally. We got it and now it is near the end with warning signs everywhere. I continue to use any strength to build short position in small sizes. The NYAD sell signal has been wonderful in the past for identifying when a top is near–we have one again!
There sell signals on the 60 minute chart and a turn anywhere up here would make sense. But until the bears get the spx below the 4718, the bulls will continue to try and press the tape higher.
There is a large bear flag channel in place, with a 4830-ish upside resistance line. I wouldn’t try and be perfect here and build a short position anywhere above 4800. The bear minimum for this pattern on the downside is 4660 and if it breaks below, then all out panic may hit quickly.
Summary: The santa rally was a success and we have the normal crew calling for another melt up year, as they were just warning of a 20% drop at the lows. There are warning signs everywhere and we could reverse lower anywhere up here and it would make sense. If the bulls continue, watch the 4830 as resistance, but start building short position above 4800. 4660 is the minimum downside target for the bear flag pattern. I will continue to use any strength to build a short position. Have a Happy New Year and see you in 2022! G
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