This week's trading will be shortened significantly by the Holiday, as Thursday is a half-day and Friday the markets are closed. So if anything is likely to happen this week, then today is the day for it to happen.
It's likely we won't see much going on until next week. Right now the markets are congesting in every time-frame I follow on my fractal dimension trend/congestion indicators. This means the market is not doing anything trendy, but is rather congesting and storing up the needed energy for the next big trendy push.
I have to go all the way out to the weekly chart to find a fractal dimension that is still trendy, reflecting the big uptrend. In such a configuration, by far the likeliest course for the markets would have this weekly chart pulling back and prices dropping further, sending the chart's fractal dimension back up towards the congestion zone.
The key will be how traders and investors react to any such adverse price movement. If there's a widespread acceptance of a price decline as "just a pullback", then the downside will go further and last longer than people are expecting. In this scenario we'll see lots of call buying during the dips, and a low VIX. This is the sentiment pattern we've seen since the recent top, and it's directly contributing to the recent weakness and the general inability of the market to spark to life on the upside.
Usually when a new intermediate trend starts, the market will initially move sharply in the new direction, but will then make a spirited move back, as one last echo of the previous trend. We've had a 40 point move down off the top so far, without any significant run back up. Sometimes the new trend just takes off and never looks back.
But we'll keep an open mind. It could still happen. If there is lots of put buying and a jumpy VIX, then we'll know that the speculators are trying to pile in for the downside, which could set up a move back up. It hasn't happened yet, but the jury is still out on this.
So the question is this: are all the bears already cleaned out, or will the market "do it to them one more time?"
The early evidence shows that this 40 point move down off the recent top is not triggering much worry, or much desire to bet on further downside. The evidence is also showing that those betting on a big end-of-quarter "window dressing" run back to the highs were disappointed.
So if the fractal trend indicators start a synchronous trend in all time-frames, and the VIX makes a simultaneous move off its lows, then that could be the start of a much larger pullback -- all the way to SPX 900 or below. It will just take a little nudge to the downside here to get those trends rolling.
I can hear the majority of bulls scoffing at the very idea of such a pullback. This is precisely the attitude that the market likes to punish.
Sentiment Dashboard
by Adam Oliensis
SENTIMENT TANK: Filled 1.2 points to 1.9% full of negative sentiment. Remains at an extremely low level.
SHORT-TERM: The hourly trend flattened out to a neutral reading with a tilt toward beginning a decline phase.
MID-TERM: Went neutral again at 75/5 with a Confidence Diffusion Index that clicked two points in the bearish direction to a bearish 1.
LONG-TERM: Weekly gauge remains flat at 95/5 with a CDI that's neutral at 0.
BOTTOM LINE: The SPX is testing short-term support with no increase in fear to speak of in the tank. Interestingly the VIX remains at an extremely low level (21.62) while the CBOE Put/Call Ratio has spiked up to 0.99 and 0.93 over the last two trading days (high levels that are short-term bullish on a contrarian basis). The 3-dma of the Put/Call Ratio has now spiked up high, which suggests that a short-term bottom should come within a several days. However the 20-dma of the Put/Call Ratio has just begun to turn up from a low level (on a de-trended basis), which suggests that we have recently put in an intermediate top. (If this is confusing, let me reiterate: SHORT-TERM we may be due for a bounce, MID-TERM we have probably topped.)
What does all that mean? Here's our template: we'll get a short-term oversold bounce and continue to form the right shoulder of a Head & Shoulders Top, perhaps through this week. After forming that right shoulder we have a strong probability of breaking below the neckline (SPX 975, COMP 1600) and testing toward the next support levels (SPX 950, COMP 1550). How long does it take to form that right shoulder? That's variable. A break to new highs obviates the test down. A break below the neckline projects the next support levels.
Se não receio o erro é porque estou sempre pronto a corrigi-lo
There's no bull side and no bear side. JUST THE RIGHT SIDE!
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