This is one of those rare times when the market has completely neutralized ahead of a big move.
Interpretively, you can read whatever you want into the market action over the past few weeks. Depending on the latest hour of trading, or what news is percolating through your mind, it's either been decidedly bullish or decidedly bearish.
Really, the market is giving its participants a Rorschach "ink-blot" test. So let's see how we all do. Here's the chart -- is this bullish, or bearish?
Let's also look at it another way, with daily candles.
We had two big white candles coming off a "hammer" candle at the bottom. That is definitely bullish. But then we turned around and spent 13 trading sessions within the boundaries of those two bullish white candles . So which is the dominant theme -- the big quick move at the beginning, or the slow, low volume retracement of that quick move?
There's no right or wrong answer to this sort of test. A check of the trend/congestion levels of this market shows an unprecedented amount of congestion right now, in every time-frame. To put it plainly -- there is no trend.
However, major trends begin from these levels of congestion and market balance. So a big move is coming, once it gets rolling.
I should point out from my own (hard-won) experience with fractal trend indicators, when they become super-congested as they are now -- with a very high fractal dimension -- then the first seemingly trendy move is often a fake-out. It gets dicey at the beginning of these major trends, as a trend can seemingly start, but the markets are in fact still highly congested, with the fractal dimension at a high level. It takes a real sustained move from these readings to actually trigger the markets into a trend.
As far as my opinion, you can color me optimistic. We're very close to a major bottom that should provide very quick gains to the upside. The "fear premium" in the VIX is at very high levels, meaning that the VIX has remained high while actual volatility in the markets has dried up.
But the big story right now sentiment-wise is bonds. The bond market is making a blow-off parabolic move to the upside.
Such blow-offs can go higher and last longer than anybody can predict, so this certainly doesn't rule out more upward movement for bonds, and more downside action for stocks. It's very dangerous to assume that a parabolic move is over until you actually see some hard evidence. A big red daily "engulfing" candle from these levels should spell serious trouble for the bond market, and money shifting out of bonds into stocks can provide a giant amount of liquidity to push stocks higher.
This morning we get the monthly jobs report, which is statistically the single biggest market-moving economic number. This could be the tipping point for the market out of its balance and congestion. My guess is that any knee-jerk reaction to the downside will be a fake-out, and the real trend is going to play out to the upside.
But if the markets go down below our action level at SPX 814 -- and stay down for more than 30 minutes -- then that will trigger us into a short position to ride down any capitulation that indeed may be coming. Just remember to stop-and-reverse that short position if the markets come zooming back up through SPX 817. Don't fall in love with that short position, as the markets can move an astonishing distance to the upside in a very short amount of time under these types of conditions.
These highly congested periods and potential capitulation phases are very tricky -- so if you don't have the time, energy, or desire to participate in this sort of market, then there's absolutely nothing wrong with sitting on the sidelines. Once the inevitable rally begins, we'll go in on the long side with Rydex positions, as there is great potential for the next up move, from whatever level it starts.
Sentiment Dashboard
by Adam Oliensis
SENTIMENT TANK: The tank filled by 6% to "72% full" of negative sentiment. The most recent direction of the tank has been to drain of negative sentiment. That should have moved the market upward but it has not and we are now threatening to bust down below the February 13 lows. It appears that the tank, by rising and working off the market's oversold sentiment condition, has now made room for what will be a downside move.
SHORT-TERM: The hourly gauge moved into a decline phase yesterday.
MID-TERM: The mid-term momentum progressed by 2% in its advance phase. However our Confidence Diffusion Index (CDI) regressed BELOW its ZERO line to a BEARISH NEGATIVE (red) ONE. When we look at our seven different technical internals on the sentiment charts we see growing bearishness. The CDI will likely drag on the mid-term gauge and flip it into a decline phase from a low level.
LONG-TERM: The weekly gauge progressed in its decline phase by 4 to 54% and the weekly CDI progressed to 4. The 54% represents a breakout to the highest percent reading in this weekly decline phase and with the advancing CDI the weekly gauge will also exert some gravitational pull on the mid-term gauge.
While the mid-term gauge has not yet given up the ghost, the hourly gauge, the mid-term CDI, the weekly gauge, and the weekly CDI are all tugging down. All that remains is for Price itself to move to new lows and we could be on the verge of a big whoosh down as the mid-term gauge capitulates.
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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