In the 07/20/15 Trader Planet article, I mentioned that we had some bullish sentiment extremes and to expect lower. The SPX proceeded to drop 70 points in 7 days and made a low with some bearish sentiment extremes and now remains in a neutral trading environment when looking through an investor sentiment window.
The SPX has been trading within the 2040-2134 range for the last 3 months and each big move in either direction has that side of the trade thinking “this time is different” and they end up being forced to cover or sell their long positions. Now that this range is being accepted by the general public and financial news media, it is time for it to break.
Woody Dorsey from sentimenttiming.com has been predicting another “Black Hole” event to hit in the 3rd quarter of 2015. We are now almost half way through the 3rd quarter and “DANGER TIME ZONE” clock has started.
Why should you pay attention to this “DANGER TIME ZONE-BLACK HOLE EVENT”? Because they don’t happen too often and the last time he predicted a “Black Hole”, the SPX dropped 200 points and then rallied 280 points-starting and ending on his exact turn dates-which you can see here
As far as what is going on now-expect the SPX to remain in a very choppy stage, where the lows and highs are tested, but not broke. 2088-2073 would be the support zone that the bulls need to hold and 2106-2135 would be the resistance levels the bears need to hold.
If there is going to be a surprise break, it would most likely come to the downside, as the “DANGER TIME ZONE” is officially started. But we have some important turn dates approaching, that will give us more information as they approach. Just be careful, as the “Black Hole” Mini Crash can start any time here.
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.
