The SPX (S&P 500 Index) broke out of the range within a range pattern to the upside last week. There were plenty of reasons then to expect the next move to be to the downside, but the Mr. Market is always right and things change.
In our last few Sentiment Timing newsletters, Woody Dorsey was expecting the SPX to drop from our February 6th-9th turn date time frame and last into the February 23rd turn date. We did see the SPX drop on schedule, but it was very fast and bid back up –“Things changed!”
There was not enough defined negativity to keep the indexes lower, and they have now entered into what we are referring to as a “slow motion breakout.” We are not big on the “big picture,” and what may or may not happen in the next 4-6 months. We would rather focus more on the next 4-6 weeks.
Listen to What Other Markets Are Saying
“Related Market Tells” means “looking and listening” for insights into the S&P. For example, the behavior of gold and crude was and is supportive of stronger stocks. The Treasury breakdown is also seen as “S&P positive.” Bond weakness may be the beginning of something big. But, more importantly, it ratifies the potential for stocks to rally at the expense of interest rates.
If this gestalt change is really occurring, it would begin a countdown to a time when equities would finally be capable of having a real correction. It needs time to unfold. But once this expected rally tops, it could be a very important top, something the bulls have not seen in over 6 years.
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