In this “all-in” “all-out” market environment, it is obvious that we are in the “all-in” phase. And sure as the sun will rise tomorrow, we have traders again, jumping in at the exact wrong time. Most have watched and done nothing or were shorting the ramp higher off the lows. But now that the bulls have been able to hold things up at the high-traders are finally believing this is for real.
Sentiment has taken a while to go from the 1% bullish reading at the exact lows to the 90%’s bullish reading we have seen over the last 3 trading days. Now that everyone is bullish again, I am expecting another drop to shake them out and get them back on the wrong side of the trade-where the majority has been all year.
Now it isn’t only the high bullish sentiment reading that has me expecting a drop, but the wave count and bearish divergences on the 60 minute charts that are supporting that expectation as well. When you have that type of trifecta view that supports a low and or high, you must give it a lot of respect.
The last “trifecta” set up was at the lows of this rally. We had bullish divergences-wave count was looking for a bounce and we had a 1% bullish sentiment reading. The SPX has rallied almost 90 points off those lows. Now we have the same set up, but only looking lower from here. Will we give it all back? I have no idea, but expecting a move down to the 2100-2080 area fits the profile as far as wave count.
For now, jumping long from these levels or this stage of the rally, is just asking for trouble. Risk Reward here is definitely favoring the bearish view, even if we do push higher for the next few days.
Tap here to get the next reversal date free
