The Fed Response to Crisis Week
Today's mood pattern implies taking an active approach and the MarketMood Indicator (MMI) is up. CDMS* is looking for scalp buy opportunities, but not for a trade that spans the entire day.
The mood pattern for this week has so far shown no sign of the flip we have been watching for, and continues to reflect the perception of crises and disasters. So far this week, just in the U.S., there have been stories of unprecedented flooding closing Yellowstone National Park, record heat in the Midwest and Southeast, Crypto firms in trouble, and 165,000 people in W. Texas without water due to a water main break.
Most often, the crisis pattern accompanies down markets and its flipped version, "government assistance" or stimulus, usually accompanies rallies. Today, with inflation on people's minds, it's possible that even if the FOMC does the opposite of government stimulus (tightens), the market could rally or swing wildly as is often seen on Fed days. We just don't know how a weekly pattern is going to play out in any one particular moment of one day.
In summary, on the general weekly outlook, I have not seen evidence of a flip. For today, the market is overdue for a good bounce, but until there's evidence to the contrary, the bears have the overall edge. The bull / bear trendline is 100 S&P points above where the market is currently at, the long term trend is strong bearish, and CDMS will not be able to put out a Daily Buy no matter what the daily MMI is or how oversold the market is, until some of these larger than daily trends turn up.
*Composite Daily Mood Signal - combines MMI and derivative indicators into one daily composite trade signal.