This Week: Denial of the Obvious

MarketMood Weekly Preview: Week Ending Sept. 21, 2018

Last week's mood pattern reflected "completion on some level.  There is also a component that often accompanies crises or disasters.  There is another component that reflects a mild bullish trend, but this is usually nullified or inverted in the presence of the crisis/disaster component."  Forecast charts pointed to continued downside, and derivative indicators were mixed.  Expectation was climax or completion of the near term bearish trend. 

Crises and disasters were reflected in news coverage of Hurricane Florence, as well as gas line explosions near Boston.  The market put in a low for the week early Tuesday, and ended the week strongly up.

This week the mood pattern begins a two week period of denial in the face of bearish news or facts, delusion, and general irrationality.  There's been too much negativity of late, and people are just tired of it.  Unfortunately, this pattern is usually followed by an unpleasant "wake up call."  Markets are likely to move primarily up or sideways until then.

Sharp Drop Alert: There is an elevated risk of an unusually sharp market drop (which may also suddenly reverse) through October 5, with the risk increasing after Sept 21.  A sharp drop alert is generated when the forecast chart (below) shows an overbought condition and a flatline period.

Market Charts: The SPX forecast charts (immediately below) are basically flat over the next few weeks.  The derivative indicators are mixed.  The Momentum Indicator reflects a trendless market over the next three weeks.  The Weekly Trend Indicator remains in strong bullish territory.   The weekly MM MACD however, remains NEUTRAL (unconfirmed sell within an upward trend).  

Trend Indicators-- the Weekly MM WTI and MM MACD:

The MM Weekly Trend Indicator (MM WTI) continues to reflect a strong bullish trend.  Unless the market closes down below 2744 SPX (this week), it will continue to reflect a bullish trend.  A close below 2732 would signal a bearish trend change.  The weekly MM MACD remains neutral (unconfirmed sell within an upward trend), and is likely to stay there for awhile. 

The MM WTI 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). 

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

Momentum Indicator:  The weekly momentum indicator is reflecting a trendless market over the next few weeks.

Qualitative Analysis Notes:  This week's identified social mood components: 1) High Controlled / Expansive => delusion, denial, irrational. 

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."