For the past week, I have been saying that the larger move from here will be to the downside. Now I am not calling for a new bear market or a major market top. Just the points down will be more than the points up from these levels on the SPX (S&P 500 index).
But as much as I expect the downside to outperform the upside from these levels over the next four to six weeks, it is not time to short. The end of quarter window dressing and the shortened holiday week, gives the bulls the seasonality advantage.
Volume has been very light and come Wednesday, it may just vanish all together. Light volume and shortened holiday weeks have been where the bulls do some of their best work. They may not let us down this week, but anything could happen with the compressed VIX (volatility index)
The short term sentiment charts have been stuck in the neutral zone for the last seven days, which could support a slow grind higher into the ½ day on Thursday. But the daily sentiment chart is throwing out some warning signs, which could also throw a wrench into the low volume grind higher theory.
Bottom Line
The bulls have the seasonality and I think expecting the slow grind higher into the shortened week has the highest odds of playing out. If the daily sentiment warning holds true, building a short position into that strength, could pay off handsomely in the coming weeks.
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To see the full market wrap up with all of the sentiment charts and technical analysis, click here.
