MarketMood Friday: Take Nothing for Granted

Where We've Been: 

It will really be nice when we can go back to primarily trading on the daily MMI sentiment call, but as said in last night's report, today's call was "complicated" and it was not one of those days.  Thursday's mood pattern implied an extreme and MMI was pointing down.  However, once again there are complications.  The MAM had reached levels that usually coincide with at least a significant bounce.  There was concurrent warnings of a rip roaring rally and a MMI down signal.  

Today the market decided it was more important to correct the oversold issue than deal with the overall bearish mood.  A caution was posted just before closing that sometimes when a signal doesn't hit during the day it plays out after hours.  Immediately after the market closed, futures took a dive.

MMI for Thursday was: close down; S&P 500 closed +1.86%

Where We're Heading:

Friday's mood pattern is concerning because it has a lot of similarities to Wednesday's when the market was down over 3%.  However, MMI is calculating an up day.  Clearly, it's another day to be ready for anything.

MMI for Friday: close up

MarketMood Data Info:

Internet search theme MMI inputs (mood vs effect inverted): men, sports, losers, disease, retire

Short Term Forecast:

Next 3 Days:

     Date        Daily MMI
10/26   Close Up
10/29 (open)   Down
10/29   

Note: Changes to next day MMI signals occur about 5% of the time, and will be announced in updates as well as the daily report should they occur.  Same day signals will not change.  Day 2 and 3 signals reflect the most current information, and are subject to change. The default trade per the daily signals is executed at market on close. except on Mondays, as there is a signal for Monday open (i.e. "weekend close") and Monday close.  The daily MMI signals are correct as daily direction calls about 63% of the time.  Please manage your trading risk accordingly.

The Moving Average Momentum (MAM) Indicator previously signaled a major trend change with a major LOW indication between April 18-25 (there was a closing low on the 25th which repeated, closing slightly lower on May 3-- a major low). 

The latest MAM signal of a major trend change showed a major low likely sometime between Oct. 11 and 18.  The closing low on October 11 led to a significant rally, but a new low was struck on October 24.  There is no evidence at this time that it will necessarily hold as a major low.  

Intermediate Term Forecast:

The primary outlook is that a corrective move is in progress.  Weekly charts are pointing downish over the next couple of weeks.   Monthly charts show the rest of the year as relatively flat which can include both large drops and upward reversals.

MM MACD signal is NEUTRAL and the intermediate trend is DOWN.  There is no swing trade signal.

The MM MACD is similar to a standard MACD, except that it uses the MMI signal data to extend several days beyond today, while the standard MACD relies solely on historical market data.   

Long Term Forecast:

The long term forecast remains bullish, but the trend has weakened substantially over the last few weeks, and is very near turning neutral.  The bullish long term trend is indicated by the generally positive divergence between the stock market and the mood generated forecast  (see long term chart below).  The MM Long Term Trend Indicator (bottom chart) which is derived from this divergence, indicates: Bullish Trend, hold long positions.  The MM LTTI has had this same bullish indication since 12 Sept., 2016.  

The MM LTTI measures trend strength using the divergence between the market trend and the forecast trend.  A move above +8 or below -8 is bullish or bearish respectively.  A value over 10 or under -10 followed by a move back through +/-8 signals a high or low is likely in.  A subsequent move below +5 (or above-5) signals a trend change to bearish (or bullish).  

Dr. Cari Bourette is an analyst at ElliottWaveTrader.net, where she provides her proprietary market mood analysis in our flagship service, "Avi's Market Alerts."