Today is Saturday August 21st and the markets had an interesting week keeping the selling contained.
The markets were rising early on in the week, only to give it back plus a little more. As the week moved on, the selling was contained. I am pretty sure that we are going to hold up in this area. There are a few cross currents taking place, but I think this is what is needed to purge the excess out of the market before any future advance can take place.
Looking back I was a little off in initial support of the market, which it did come in as expected, but it did not hold. The lower area of support held more or less, off by a couple of points (S&P futures 1065), as other factors take hold of this market in its support for a possible sustained rally.
The market sentiment changed for the better in defense of the bulls, in that the sentiment turned a bit more negative, which in turn is positive. We never did get the big rally, but only a smaller reaction rally coming off the lows of the much larger sell-off from months past. The market needs time to fill in the gaps and that is what it was doing. I would add, if the market really wanted to go down, it sure is in a perfect place right here to “crack”, but somehow, I don’t think that is going to happen, again, just my opinion, which could be wrong.
I see the current position in the market as finding support in this area. We may hoover for a couple of days, as again the new sentiment numbers will be voted on after Tuesdays closing market. This is useful for a couple of reasons. Last week the market sentiment turned down from 41.7 to around 37%. That was significant because the signal changed as the market had advanced sizable on the day of the poll. So we saw a 4% shift negatively as the market advanced. The selling that took place Thursday and Friday should add to the negative sentiment if the market can hold in this area come Monday and Tuesday. Either way, there is a lot of negative sentiment floating around which usually can only be erased by a market advance.
The market needed to work off the excess and time needed to pass to better allow the market to be and get in a position so that it could move out. Either way, the energy is being built up so that it can be expelled in one direction or another. As day-traders, we don’t really care which way it goes, only that it goes and it will.
So my best guess is that we consolidate in the general area for a couple of days, further building up this market pressure for a surprise market advance later in the coming week. This time, the market should have some staying power and the shorts will really be covering themselves in full force. I do realize that something could make this change of which I have no control, not that I had or have control anyway, but this is just the big picture and how I could see things shaping up. Late July and early August the market wanted to advance, but a continued move from that point would have been to obvious, so a little head fake was in order. In addition, this move back is very normal and consistent with general market movements before a rally, again I say if it comes.
I want to through this in, just to balance out my opinion on the coming move. When I look at the daily charts, I see the other side of the equation as well and I need to look at it no matter how or what I think will happen with the next move. In fact before I continue with my reasoning, this is exactly what needs to take place for any smaller market move when deciding to go long or short. You size up your analysis based on your trading method and which ever direction has more evidence for that directional move, you need to consider a trade in that prevailing direction. Looking at the other side of the equation though is just as important. I know when I get one-sided in my opinion I can get tripped up as any trader can.
With that said, the market is also in a perfect place to continue its sell-off, if in-fact it wants to. I will put up a daily chart of what I am talking about so you can see all of what I am saying. Where the S&P 500 currently stands, their exists a free flowing path to the downside area, around the bottom red line as drawn would be normal and natural for it to occur. That would be looking at both sides of the market and a wise thing to do. This is where market sentiment can give you a clue as to the next major market move and where I am taking one of my clues from. I have been following this “Investment Advisory Market Sentiment” figures for a long, long time and have seen it come through time and time again.
If the market can hold up Monday and Tuesday, the outlook for the market advance becomes stronger. Again, be sure to take a look at the daily chart below. You can also see market resistance coming in at around 1110 or so, the top red line. Currently the daily and hourly momentum is down and the path of least resistance is down, but lets see if we HOLD this Monday and Tuesday to give my scenario a chance for life. 
I did no trading this week as I took some time off to spend with family. I have a couple of shots below of my area, where I got out to enjoy some of God’s creation. My kids came to visit and it was great to see them. My son John, 28 who is an electrical engineer in Portland Oregon and my daughter Angie, 24, (entrepreneur) visiting from the San Francisco Bay Area.
We hiked on the Pacific Crest Trail which is a trail that links from Mexico to Canada and passes right through where I live. I have a shot of a nearby waterfall and swimming hole a couple of miles from my home, very cool, take a peek if you care to. Thanks for stopping by and Good Trading to all, Vince.
Related posts:
- Market Ready for Continued Advance
- Market Now In Position to Rally as Bearish Sentiment Builds
- Stock Market Showing Weakness before Unemployment Numbers
- Where is the Market going for the next 6 months? My thoughts!
- Alert !!!!! Big Development for Wall Street Bulls
Tags: market pressure, market sentiment, momentum, resistance
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