The Sentiment Timing Index has been doing a very good job letting in us know when to expect the larger moves both to the upside and downside. The important thing about trading the Sentiment Timing turn dates, though, is not to be anchored to the date but to use it as a time period for a potential turn.
Since January 15th, when we were set up for a confusing grind higher, the volatility has picked up a few notches. The SPX (S&P500 index) is trading in a fairly large range 1990-2070 and the Sentiment Timing Index turn date for lower prices has arrived.
We have been saying for the last month that the February 5th through the 9th time period was set for lower prices. The low came on February 6th, and from what we can see, should remain weak until our expected low date time period.
Many will look at the recent turn down as just a pullback from a sharp run higher. Once they realize the top is in place, panic will set in, and we should see the downside momentum pick up. I am guessing most traders will be all-out bearish come the low turn date, which will set up a very nice buying opportunity.
Until we see investor sentiment drop from here-and traders throwing in the towel for the cookie cutter 8% gains for the year, one should be very conservative and cautious about looking higher. Don’t be surprised to see the December lows tested, or even broken, as we head into our next low turn date in February.
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