Since December 23rd, the Sentiment Timing Index has been telling us to expect weakness from late December into January 16th— with outsider turns coming soon. Yes, it is great picking the exact dates when the markets will turn and for the most part, the SPX (S&P 500 index) has reversed right on the expected turn dates.
Making money is not about knowing the exact date of the turn; rather, it is about knowing the time period. I have been bearish for the last three weeks, and now it is time to switch hats and start buying the dips. I went over using “time and price” and the time aspect of this cycle is set to change.
Our window for the expected low has been January 16th to January 22nd. We are here now. Can the SPX drop for the next couple of days-heading into the ECB rate decision? Absolutely. But now is not the “time” to be looking short. Instead, you want to use weakness to get long. Simply find the “price zones” and layer in on weakness.
If momentum picks up and the lows from last week are taken out, watch the 1970-1960 area on the SPX. You can also take a small piece if the SPX tests last week’s lows and holds. The point is to use weakness to start building a long side position, as an expected low is due to hit this week, if it didn’t already make that low on Friday.
Don’t fall in love with the long side though. These lows are not the actual lows and the SPX will be back down here or lower again. Our turn date is in February, so there is time for the bulls to push the tape higher. This cycle will form some type of ABC pattern – A down B up (expected now) and then C down, when our February turn date comes into play.
To learn more Gary Dean and to get a free sentiment timing index chart, please click here.
